Posted on 06/08/2002 10:30:52 PM PDT by lewislynn
June 8, 2002, 10:45AM
Having money by evading sales taxes isn't a cost-effective strategy.
Just ask Dennis Kozlowski. Until recently, he was chief executive officer of Tyco International -- a huge conglomerate. He resigned shortly before his indictment for allegedly evading $1 million in New York sales taxes on the purchase of $13.1 million in paintings.
It looked to be the usual sales tax evasion scheme: If you buy something and ship it out of state, you don't owe sales taxes. In Kozlowski's case, however, the paintings wound up in his New York apartment instead of going to his place in New Hampshire, according to the district attorney.
But most of us are probably guilty of evading something called use taxes. If you buy something in another state or country and bring it home to Texas, you owe state and local use taxes on it -- the same amount you would have paid in sales taxes if you bought it here.
If you don't pay the use tax, you may be hearing from Carole Keeton Rylander. She is the Texas comptroller of public accounts -- the chief tax collector for the state of Texas.
Here's how the use tax works. Say you bought something -- perhaps a piece of art -- in another state and had it shipped directly to Texas. That way you didn't have to pay sales taxes in that state. But you are supposed to then pay Texas state and local sales taxes on the purchase.
Or say you bought something in another state and paid a 4 percent sales tax there. If you bring it back here, you're supposed to remit to the Texas comptroller the difference between the 4 percent sales tax and the higher Texas and local ones.
Most of us stiff the Texas tax woman when we buy something from a catalogue or Internet retailer. Unless the retailer has a physical facility in Texas it doesn't have to remit Texas sales taxes. And most don't.
Few of us bother to go to the comptroller's Web site on the Internet at www.cpa.state.tx.us, fill out the form and pay the use tax.
The odds are great you'll never get caught.
True, the comptroller in the last few years has acquired a very good tool for tracking down those who don't pay. It's called data mining -- the use of sophisticated computer programs to search electronic databases for relevant material.
Data mining started in the private sector. A company might shift through millions of different records to come up with a list of 1,000 people who just had to have what the company is selling.
But the only two databases the comptroller's office mines to find those evading use taxes are U.S. Customs records to discover Texans buying expensive items overseas and bringing them home and Federal Aviation Administration records for people who buy airplanes outside the state and hangar them in Texas.
Mostly, data mining is used to collect the corporate franchise tax.
A franchise tax is what corporations pay for the privilege of doing business within the state. Actually, the Texas franchise tax is really a de facto corporate income tax. But we don't call it that because Texans are proud to say they don't have state income taxes.
Lisa McCormack of the comptroller's office said the state agency will never have enough auditors to check tax returns of every corporation. The data mining allows them to more intelligently direct their auditors to where they are liable to collect the most money.
It also gives them clues about companies operating in Texas that don't pay the franchise tax.
The comptroller's data mining software probes records at other state agencies, like the Texas Workforce Commission. If a company is paying state unemployment taxes for Texas workers, then it's operating in the state. So the comptroller compares those records with franchise tax records to see who is being naughty.
If the comptroller's office finds companies it thinks are evading Texas franchise taxes, they send them a tax questionnaire. About 25 percent of companies reply to that letter. A follow-up letter gets about 35 percent more to fess up.
So what about those who don't reply at all? The comptroller's staff estimates how much tax they think the company owes and sends it a bill. If it doesn't pay, the bill is turned over to the Texas Attorney General's office for collection and a possible lawsuit.
So what's the payoff on data mining?
Since March 1998, it has cost the comptroller's office $4.5 million for its data-mining project. They now pay an outside contractor $160,000 a year to keep it running.
And the return? McCormack says the system has brought in an additional $240 million in taxes -- most of that franchise taxes.
They are not the only state agency into data mining. The Texas Department of Human Services routinely cross-checks welfare rolls against automobile and home purchases to see if recipients are concealing assets to collect welfare.
If I move from NH (no sales tax) to Texas, do I have to pay tax on everything I bring? At what point do I no longer have to pay TX tax on items purchased in no-tax states?
Question 2:
If I move from TX to NH, where do I go to collect my rebate on the items I purchased in TX and now domicile in NH?
Does the tax work both ways, or only in the favor of FR's favorite state?
Well since NH didn't bate you to begin with, you'll have to get your re-bate from that vast wasteland otherwise known as Texas.
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