Forget nickels, the ‘Use Tax’ could generate millions

Hi everyone,

A Guilford state senator named Edward Meyer is pushing hard for a five-cent tax on shopping bags, regardless of your answer to the age-old question, “Paper or plastic?”

While I’m sure Meyer means well — plastic bags take forever to decompose and the state is facing a $3.4 billion budget deficit, after all — his proposal is like stacking nickels to the moon.

It’s going to take a long, long time to get anywhere.

Instead of nickel and diming people — quite literally, in this case — why not opt for a revenue solution that’s already on the books, one that could generate millions for cash-strapped Connecticut?

It’s called the Connecticut Individual Use Tax.

Never heard of it?

Me, either — not until recently, anyway.

As it turns out, the Connecticut Individual Use Tax is the same 6 percent tax that you’re supposed to pay “when you purchase taxable goods or services for use in Connecticut from an out-of-state retailer not registered to collect Connecticut use tax,” according to state Department of Revenue Services officials.

Remember all those online and mail-order gifts you bought during the holidays?

Did you ever wonder why some merchants charge you Connecticut’s 6 percent sales tax and others put a nice, round zero in the sales tax slot during checkout?

Me, too — so I asked Sarah Kaufman about it. She’s the director of communications for the state Department of Revenue Services in Hartford.

“If you buy something online (from a regional or national retailer) and you could buy the same item at your local brick-and-mortar store of the same retailer in Connecticut, they’re going to charge you sales tax,” Kaufman said Friday.

Think Walmart, Target, Sports Authority, Macy’s, Sears, Kohl’s, you get the picture.

“But if you buy something online and you’re not charged sales tax (by a retailer without a brick-and-mortar presence in the state), then you’re responsible for paying the sales tax on that item,” Kaufman said.

Not in all cases, however.

Food, clothing and footwear under $50, certain medicine, purchases like that are still exempt, just like they are when you buy them at your local department store, grocery store or pharmacy.

But because so few people itemize their “Use Tax” every year — and even fewer people know about the law — Connecticut, just like many other states around the country, is missing out on millions of dollars of revenue.

Here’s how the state Department of Revenue Services explains it: “The use tax is complementary to the sales tax. Together, the sales and use taxes act to tax Connecticut purchasers equally whether they purchase goods and services within or without Connecticut.”

In 2009, for example, the state collected nearly $8.3 million from only 12,676 returns reporting Individual Use Tax charges, according to Kaufman and her research team in Hartford.

Just imagine if everyone paid their “Use Tax” just like they already pay their sales tax? It would go a long way in helping to reduce the state’s massive budget deficit.

To read more about the “Use Tax” on the books in Connecticut, check out my “Take on Life” column Sunday.

Exclusively in the print edition of The News-Times.

Categories: General
Brian Koonz

12 Responses

  1. We the People says:

    The solution, Mr. Koonz and to anyone who agrees with you, is not to solve budget problems by throwing more and more money at it. The real problem is creating efficient agencies and services, not simply throwing more money at it. I hope you aren’t a firefighter as your solution to putting out the fire would be to throw more wood on it.

  2. Rasmus says:

    I agree with Mike about the ignorant comments above by people who didn’t read the article and don’t understand how the Use tax is applied. However, the likely reason these people don’t know how it works is because they have never paid it. That is my main complaint about this tax. It is basically voluntary. There is no way to enforce it. Only honest people actually pay it — people who actually believe that they have a moral obligation to pay their taxes so they can have nice things like paved roads, public schools, police, fire, and the rest.

    If the Lottery is a tax on the stupid, the Use tax is a tax on the honest. Both are exploitative and unfair.

  3. Gunnhild says:

    Remember when the CT state income tax was instituted to cover our deficit over twenty years ago. Well!! We still have it even with the state income tax that was to cover the red. In fact, we lost businesses here in greater Danbury and the state to the southern states in droves after that tax was placed on citizens. What we don’t need are more taxes, higher taxes, and phony taxes(can we say “fees”). The plastic bag tax is just another nickel and diming of Connecticut citizenry and this tax, whether on the books or not, can hardly be enforced nor should it. The state of Connecticut needs to cut their spending. Bloated state unionized employment, over-reaching infringement on businesses, taxes up the wazoo, educational funding that doesn’t produce squat in our kids, and victimization and entitlement attitudes to a whole slew of people who can and should be employed in jobs that they are qualified to do.

  4. Brian Koonz says:

    Mr. Improta,
    As always, thanks for your contributions to the discussion.
    Brian Koonz

  5. Mike says:

    There is lots of reading comprehension failure in the comments here so far. To comments #1, #2 and #6, did you miss the clarification?

    “But if you buy something *ONLINE* and you’re not charged sales tax (by a retailer without a brick-and-mortar presence in the state), then you’re responsible for paying the sales tax on that item”

    In other words, if you go to an online only merchant, buy a nice new 65 inch LCD tv for around $3000 and don’t get charged sales tax, there is ALREADY a law on the books that says that when you’re filing your taxes, you need to itemize that purchase and pay the CT sales tax on it.

    To commenter #3 and #5, maybe you missed the fact that the law is already on the books and has been for years.

    The blog post is just recommending that people get educated about the existing law and told to follow it. Apparently… he’s right.

  6. Mr Right says:

    Like a salivating pig at the trough, Koonz drools at the prospects of extorting more money from CT Taxpayers.

  7. Barbara says:

    How about items that are bought out of state for use in state for which you are charged out of state taxes ? I go to NY, I buy a shirt – I pay NY state taxes. The use tax suggests that I then have to pay CT taxes as well.

    Conversely someone from out of state comes to CT, buys good or services, and pays CT taxes – do we refund their money ?

    I’m not sure how anyone who fills in a CT state income tax return could not be aware of the use tax – it’s right there in black and white.

    The RIGHT answer is to first get rid of waste to reduce the shortfall rather than just raising taxes. Govt entities have to be responsible in their use of taxpayer dollars – something we all know doesn’t happen enough. That goes for management of contracts as well – you bid a contract, you over run it – well, tough luck, you bid – that’s what you get paid. Start estimating contracts accurately.

  8. Chris Pepin says:

    The state of Connecticut should focus its efforts on responsible spending rather than passing unenforceable laws designed to take more of its citizen’s hard-earned paychecks.

  9. K. Doberman says:

    With this kind of ability to get right to the root of the problem and solve it … you should consider a run for Liberman’s seat.

  10. Jay Mallott says:

    Trust the News-Times to advocate yet another tax. Note to News-Times: The Dems in Hartford don’t need your help. They’re a creative bunch up there.

  11. chris123 says:

    If I buy something out of state, while on vacation, and pay that state’s sales tax for that purchase, I should be paying a CT sales tax as well?

    And this makes sense how?

    Perhaps the answer is to get a handle on spending, and making CT more attractive for businesses to locate to, rather than trying to figure out ever more creative ways of draining CT residents of their resources.

  12. Tax Man says:

    I’m sure you are as well meaning as Mr. Meyer but is it really that simple? Are you saying that after the Connecticut folks read your “Take”, that while on this summers vacation, they will stop in N.H to buy their tax free booze but this time will keep records so they can voluntarily report it on their state tax forms?

    It’s not just the rich that buy on the Internet. It seems a bit harsh to give someone a free phone and minutes and then ask them to pay 6% more for Internet purchases.

    How many more people will the state want to hire to collect the use tax? Maybe someone could look into the 500,000 state employees we now have towards possible cutback. Maybe we only need 150 commissions instead of 175. Maybe some of the countless social services programs could be MORE EFFECTIVE if combined and better managed. Maybe we don’t need as many cars on 84 with state plates with drivers using state provided phones. Maybe we could get into the same budget mess with 1/2 the number of congressman.