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“Use Taxes” – Legitimate? Methinks Not.

March 4th, 2006

Are you familiar with the “use” tax? Michigan has one. I venture to guess that most other states do, too. The basic idea is, that you have to pay Michigan sales tax on any item that you purchase out of state and plan to use in the state. So for example, the $500 I spend on a rental car in Seattle, WA is not taxable in Michigan. But the $500 snowboard that I bought from a vendor in Colorado, and had shipped to my house in Michigan, is.

I’ve bought alot of things online. And I do so for various reasons – not the least of which is to avoid paying sales tax. Face it, when a vendor is offering free shipping on your order, and you’re not paying sales tax ($30-40 on a snowboard) it’s hard to pass up. Within the last year, I’ve bought several hundred dollars worth of snowboard equipment, almost all of it from online vendors. I paid tax on very little of it, and then, only because one such vendor who I’ve used occasionally happens to be located in Michigan. Under current law, I’m supposed to report any such purchases, and then pay 6% sales tax on them.

Tim Shaughnessy, over at Division of Labour reports a similar tax in Lousiana, and then sets about explaining the various reasons for which he concludes (and I concur) the “use tax” is “about…as unjust” as could possibly be devised. Among the specifics, he cites typical justification for state taxes – and demonstrates that out-of-staters necessarily should be exempt from paying for another state’s infrastructure.

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In another, quite related story – the Detroit Free Press notes that the State of Michigan is sticking it to thousands of Michigan residents who skirted the ridonculous tax on cigarettes in this state, by purchasing online. As the Freep mentions, the savings could be substantial. I remember seeing websites a few years ago, that would sell cartons of cigarettes for $20, and $2 shipping per carton. Today, a carton in Michigan will run you at least $40.

I’ve previously cited the regressive nature of sin-taxes, the “use tax” issue only compounds the problem. In light of this new information, I’d argue that there does not exist even a single, justifiable reason for the state to pursue “out-of-state-sinners.” No politician can any longer maintain that “sin taxes” are levied, or raised, to “deter” people from “unhealthy, dangerous” habits. It’s not there for our safety, our well-being. No matter how veiled the arguments, the tax is imposed only to create an additional revenue source for the state – there is no otherwise legitimate interest.

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Just another angle I’d like to throw out there, If I may: Article 1, Section 10: “No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing it’s inspection Laws: and the net Produce of all Duties and Imposts, laid by any State on Imports or Exports, shall be for the Use of the Treasury of the United States; and all such Laws shall be subject to the Revision and Controul of the Congress.”

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  • KipEsquire says on: March 5, 2006 at 9:04 am

     

    A few years ago, New York State got intself into a PR fiasco when it sent tax officials to the parking lots of New Jersey malls, photographed cars with New York license plates and sent the owners postcard “reminders” that they were expected and required to pay New York sales tax on their purchases in New Jersey.

    John Ashcroft would be proud…

no third solution

Blogging about liberty, anarchy, economics and politics