A Few Tennesseans Actually Pay Sales Tax on Out-of-State Purchases

State Sen. Douglas Henry, D-Nashville, recently sent the state a $97 check for sales tax due on his online purchase of books – but Action Andy Sher reports that’s a pretty rare thing in Tennessee.
State figures show the state Revenue Department received only 3,041 consumer use tax returns in 2011. Those taxpayers remitted $4.78 million — about 1.3 percent of the estimated $365 million in sales taxes that went uncollected by out-of-state online retailers for the year.
Most payments appeared to be for big-ticket items such as cars, trucks, boats and furniture purchased not online, but across the state border, state figures show.
….The state shows relatively little appetite for going after consumers who make small online purchases, noted Dick Williams of Tennesseans for Fair Taxation.
That may make sense, Williams said.
“Part of the rationale for this is the tax is due, but it’s not realistic for the Revenue Department to spend a lot of time raising what individually would be small amounts,” Williams said. “Collectively it can be a significant amount.”
The Revenue Department does seek to track large purchases through third-party research and information exchanges with federal and state agencies, including U.S. Customs and the Federal Aviation Administration.
Linda Kelley, the department’s director of taxpayer and vehicle services, said officials last year issued 1,913 assessments for unpaid consumer use tax, including 267 assessments on aircraft.
And there’s a cost to not paying the tax, whether because of negligence or fraud, Kelley said in an email.
“If the failure to pay taxes is determined to be due to negligence, the taxpayer would face a penalty in the amount of 10 percent of the tax due along with interest,” she wrote.
In a fraud case, “the taxpayer would receive a 100 percent penalty along with the interest due.”
So what does Revenue Commissioner Roberts make of the situation?
“Obviously it is a concern to the State of Tennessee,” Kelley’s email stated. “However we believe this matter is best addressed at the federal level.”

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