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.

Brian Koonz