Online Cigar Purchases and State Tobacco Taxes.

[The Bruce]

Lets see if this thread is met with a deafening silence.

If I purchase a box of cigars online I believe I am expected to pay my States Tax on that product. I don't particularly like this idea, but I you have to respect the Tax Laws. So, I got to my states Government web site and find all the forms to submit taxes for people who sell the Tobacco Products, but I do not find a form for the consumer.

How should this be handled? Are online Cigar sales a small enough market that the States don't worry about? (Unlikely!) Am I the only one who is concerned about this?

What do you think?,

The Bruce

[12stones]

Currently, the law only requires you to pay state taxes if you AND the seller are in the same state. There's been talk for the past few years about changing that but as for now, I wouldn't worry about it.

[joed]

Originally Posted by 12stones

Currently, the law only requires you to pay state taxes if you AND the seller are in the same state. There's been talk for the past few years about changing that but as for now, I wouldn't worry about it.

I think that you will find that this aspect of the tax law is the driving force behind the state's effort to restrict the interstate shipping of tobacco products. I believe that FEdEx has agreed to refuse to ship products from retailers that sell tobacco products in 27 states.

I believe that we may all owe Mr. Spitzer, AG for NY, a letter of thanks for this wonderful development in online tobacco sales.

Originally Posted by 12stones

Currently, the law only requires you to pay state taxes if you AND the seller are in the same state. There's been talk for the past few years about changing that but as for now, I wouldn't worry about it.

As long as this is your state's current law, you are legal by NOT paying taxes. Once these laws change (which I suspect most states will acomplish in the next decade), then I suspect the vendor will automatically tax you. Doubt they will actually send the tax money to your state, but that's another question.

I will say that I report on-line vendors that charge me an Alabama sales tax to the state tax board, mainly to make sure the vendor actually pays that money to the state that they have collected from me. Since my state does not require these taxes to be collected, and the vendor has been informed of this, and still insist on collecting the tax, I report them to keep them honest (not that they would pocket the tax - surely that would not be happening!!)

If your state doesn't require the tax, chances are you would create more confusion than the tax would pay for!

[Smell the Colors]

Maine (and a lot of other states) have what's called a "Use Tax". What they want you to do is every year when you fill out your state income taxes you fill in the box for "Use Tax" with a value equal to your state's sales tax times the value of the products purchased out of state (ME sales tax is 5% so an example would be $1000 (value of gars) x .05 = $50 owed to the state). Now, you'd only ever have to prove you didn't buy products out of state if they audit you for some reason. Not filling out the "Use Tax" box is not a red flag.

Josh

[Puro.Esq.]

Originally Posted by Smell the Colors

Maine (and a lot of other states) have what's called a "Use Tax". What they want you to do is every year when you fill out your state income taxes you fill in the box for "Use Tax" with a value equal to your state's sales tax times the value of the products purchased out of state (ME sales tax is 5% so an example would be $1000 (value of gars) x .05 = $50 owed to the state). Now, you'd only ever have to prove you didn't buy products out of state if they audit you for some reason. Not filling out the "Use Tax" box is not a red flag.

Josh

I disagree with the bold portion of your quote. Generally, one is not required to prove a negative as is the case with your point. I would think that they would have to prove that you DID buy out-of-state products. The act of proving a negative is the same as being guilty until proven innocent. However, with all that in mind we are talking about the state's version of the IRS so anything would be possible.

Just an observation.

[Smell the Colors]

Originally Posted by Puro.Esq.

I disagree with the bold portion of your quote. Generally, one is not required to prove a negative as is the case with your point. I would think that they would have to prove that you DID buy out-of-state products. The act of proving a negative is the same as being guilty until proven innocent. However, with all that in mind we are talking about the state's version of the IRS so anything would be possible.

Just an observation.

That's really what I meant, I just worded it badly.

I suppose there might be a case where the auditor asks "you really didn't buy any products out of state?" at which point you say "prove otherwise." Considering I live right on the state line with New Hampshire, I might have to sweat that one out a little more than others (especially if they start looking at my credit card statements).

[palm55]

It's only a matter of time before the tax on internet cigar purchases will be "automatic," as it IS for cigarrettes in the state of Michigan.

Thousands of Michiganians who bought cigarrettes online were taken by surprise last year, when they received a tax bill from the state in the amount of $2 per pack.

I don't know how they tracked it but they DID... And I suspect that they'll be doing the same with cigars (perhaps even this year).

I'm just the messenger, guys... And it's as discouraging to me as it is to you!

[rjose]

Originally Posted by palm55

It's only a matter of time before the tax on internet cigar purchases will be "automatic," as it IS for cigarrettes in the state of Michigan.

Thousands of Michiganians who bought cigarrettes online were taken by surprise last year, when they received a tax bill from the state in the amount of $2 per pack.

I don't know how they tracked it but they DID... And I suspect that they'll be doing the same with cigars (perhaps even this year).

I'm just the messenger, guys... And it's as discouraging to me as it is to you!

I think (hope) that was just a cigarette issue. I would think he amount of tax revenue lost in cigar purchases would be minute compared to cigarettes. Besides the tax on cigars would be much harder to calculate after the fact because it is based on the wholesale price of the cigar (in Michigan) whereas cigarettes are taxed a flat rate per pack.

[palm55]

Originally Posted by rjose

I think (hope) that was just a cigarette issue. I would think he amount of tax revenue lost in cigar purchases would be minute compared to cigarettes. Besides the tax on cigars would be much harder to calculate after the fact because it is based on the wholesale price of the cigar (in Michigan) whereas cigarettes are taxed a flat rate per pack.

I hope you're right! But The Godmother (Granholm) is a sneaky bitch... er, witch... er, woman. If there's a way to tax it, she'll find it!

Originally Posted by Puro.Esq.

I disagree with the bold portion of your quote. Generally, one is not required to prove a negative as is the case with your point. I would think that they would have to prove that you DID buy out-of-state products. The act of proving a negative is the same as being guilty until proven innocent. However, with all that in mind we are talking about the state's version of the IRS so anything would be possible.

Just an observation.

In Fact, the US Tax Court IS NOT like the criminal courts. In the criminal courts, you are considered innocent, and the government has to prove your guilt. The tax court is exactly the opposite. You are assumed guilty, and it is up to the taxpayer to prove the government wrong. I would almost bet that most, if not all state tax courts also follow this example.