"A.G. Kalman" <glendale202-mtmtax[at]yahoo.com> wrote:
- quote -

The state can tax sales within the state but not sales made
in another state even when the rate is the same( which is
usual). sales taxes are assessed on the buyer and if the
buyer is avoiding the accommodation of the seller acting as
a tax collector then the buyer is required to remit the tax.

This applies to in state sales with the declaration of the
intention to resale and then not resaling.

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Paul Thomas, CPA wrote:
- quote -

Actually, neither California nor Nevada imposes a property
tax on inventory.

The reason for putting inventory in Nevada has to do with
the corporate franchise (income) tax. Multistate businesses
apportion their income by a three factor-formula of
property, payroll, and sales, with the sales factor given
double weight. In computing the California numerator of the
sales factor, interstate sales are assigned to the
destination state. However, if the taxpayer is not subject
to tax in the customer's state, the sale will be "thrown
back" and included in the numerator of the state from which
the merchandise was shipped.

A business that is not subject to a net income tax in more
than one state is not eligible to apportion its income
within and without the state. For a California business
that ships products to customers in other states but is not
taxable anywhere else (perhaps because it is protected by
Public Law 86-272), placing inventory in a Nevada warehouse
will create eligibility to use the apportionment formula.
Furthermore, sales shipped frm the NV warehouse to customers
in other states where the seller is not taxable will be
thrown back (for sales factor purposes) to Nevada, where the
shipment originated, not to California. Since the sales
factor has twice the value of the other factors in the
apportionment formula, this can have a significant effect on
the seller's franchise or income tax liability, without
creating any additional state income tax exposure, since
Nevada has no individual or corporate income tax.

Katie in San Diego

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The bottom-line justification for a "compensating use" tax
is that each state, having been a plenary sovereign prior to
the Constitution, retains the full power of taxation that
belongs to every sovereign unless there is some overarching
rule that prohibits a particular exercise thereof.

Thus, in the absence of any Constitutional restrictions, a
state can tax anything it likes that it otherwise has
jurisdiction over. A "use" tax is a tax imposed on the use
of property within the state's jurisdiction - since the
user, the property, and the act of use all occur within the
state's boundaries, the state has plenary jurisdiction over
the "use" and is therefore entitled to tax it if the
legislature so chooses.

There is, however, one Constitutional limitation on any
"use" tax - the Commerce clause. No state may exercise its
powers to discriminate against interstate commerce; thus, a
"use" tax, which is generally imposed in lieu of a sales tax
on in-state sales (out-of-state sales not being taxable
because neither the seller nor the place of sale are subject
to the state's jurisdiction), cannot discriminate against
interstate commerce. In addition, states may not impose
import tariffs. These two rules impose restrictions on use
taxes that, in essence, require that they be imposed as an
adjunct to a sales tax on in-state sales and cannot be
imposed in the absence of such a sales tax.

Beyond that, there need be no justification for a "use" tax
other than the state legislature's policy determination to
impose one.

However, if you want to play the game of "what did I get
from the state," consider this - tangible personal property
often gives rise to torts which are resolved in the local
state courts (even if you bought your car out-of-state
you're still entitled to sue in your local state courts if
someone negligently damages it - you're not forced to go sue
in the out-of-state courts for the state where you bought
the car); since local state taxes pay for local state
courts, including revenues from sales taxes, it stands to
reason that one of the "benefits" you receive from the state
with respect to your out-of-state property is the right to
seek redress in the in-state courts if someone else
negligently damages your property. Since the state may
incur expense (e.g., costs of maintaining courts) in
connection with your ownership and use of property you
purchased out-of-state, you have received a benefit with
respect to such property and the state may recoup its costs
through a use tax to pay for the benefit you've received.
QED (even if you buy into the simplistic version of the
benefits justification for taxation).

That being said, the bottom line is: the state you live in
has jurisdiction over both you and the property you own (and
use) in that state and therefore has plenary power to tax
you with respect to that property, whether it calls it a
"use" tax or a property tax.

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Bernard S wrote:
- quote -

I think you have missed the point. If a state has a 5%
sales tax and enacts a compensating use tax of 10%, the
federal courts would rule the use tax unconstitutional as it
violates Article I, Section 8, Clause 3 (commerce clause).
The term "taxpayer" is defined broadly. The seller of
merchandise is a taxpayer.

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"Dick Adams" <rdadams[at]smart.net> wrote:
- quote -

Besides if there were no Sales or Use tax, the state would
find some other way of getting money out of you through
higher income, real estate, property, etc taxes.

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"L K Williams" <lanny[at]loxinfo.co.th> wrote
- quote -

Property tax is not "use" tax. Almost all states impose a
property tax on inventory. They also have provisions for
what we call "freeport exemption" for inventory destined for
out of state shipment/sales. Freeport does not apply to
inventory wharehoused for more than 12 months.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

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"A.G. Kalman" <glendale202-mtmtax[at]yahoo.com> wrote:
- quote -

The term "use tax" is nothing more than an euphrenism for
"interstate sales tax". The use of the word "sales" would be
the taxing of interstate commerce. The taxpayer is the
in-state purchaser. It does not apply to "out of state"
taxpayers. The "out of state" party is the seller and tax
collector, not taxpayer.

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"Darryl" <DarrylJ[at]yahoo.com> wrote in news:11udbmoifi13m49

- quote -

Come to Hawaii. We don't have a sales tax, rather a general
excise tax and use tax on goods and services. With certain
narrow exceptions, if I hire an accountant on the mainland
to do my taxes, I must pay a 4% use tax on the value of
those services.

scott s.

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"Paul Thomas" <paulthomascpa[at]bellsouth.net> wrote:

- quote -

I have not lived in California for many years and I don't
recall the details. But, I seem to recall that businesses
in California maintained warehouses in Nevada because
California had a personal property tax on the inventory
stored in the state.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"Darryl" <DarrylJ[at]yahoo.com> wrote:

- quote -

Well, one of the arguments, anyway, is that use taxes create
a level playing field for businesses within the state. If
you buy something from a store in your state, you pay the
sales tax. If you order the same item from a mail order
company out of state, you do not. Without the use tax, the
local merchant is at a competitive disadvantage.

Take the example of Washington and Oregon. Washington has a
sales tax, Oregon does not. People in Vancouver, WA drive
across the bridge to buy things in Oregon and take them
home. I remember that, years ago, the Washington state
police used to set up road blocks at the end of the bridge
to check for contraband -- particularly cigarettes.

I have't lived in Portland for years, so maybe my
information is dated.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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"Darryl" <DarrylJ[at]yahoo.com> wrote

- quote -

They tax you because:

1) they have the power to do so

2) they want the revenue to buy votes

--
To email me directly, remove CLUTTER.

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"Darryl" <DarrylJ[at]yahoo.com> wrote:

- quote -

Because the Legislature is the Daddy, the Governor is the
Mommy, and they say so.

--
Phil Marti
Clarksburg, MD

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Darryl wrote:

- quote -

It's really a compensating use tax, It and the sales tax is
designed to make all tangible property identified as
taxable, that is used or consumed in a State subject to a
uniform tax regardless of whether it is acquired in the
State, making it subject to the sales tax, or from out of
State, making it subject to the use tax at the same rate.
The courts have said that equal treatment for instate and
out-of-state taxpayers similarly situated is the condition
precedent for a valid use tax on goods imported from
out-of-state. Valid being defined as something that does
not violate the Commerce Clause of the Constitution.

The bottom line is that without a compensating use tax one
would be buying a lot of stuff (especially big ticket items)
from out of state to avoid sales tax. The States are merely
trying to preserve their revenue base.

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"Darryl" <DarrylJ[at]yahoo.com> wrote:

- quote -

The same justification as usual: they want your money. Are
you not used to that concept yet?

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"Darryl" <DarrylJ[at]yahoo.com> wrote:

- quote -

Because it's a tax, not a service fee. That's what taxes
are - assessments made without getting something directly in
return.

Stu

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"Darryl" <DarrylJ[at]yahoo.com> writes:

- quote -

Given that states can tax you simply for OWNING something
(you know -- property tax), I doubt there's any legal
problem with them taxing you on buying something.

- quote -

Where do you get the idea that a state (or country, for that
matter) has to "enable or assist" you with anything to be
able to tax you?

- quote -

They are the state. That is (literally) all the reason they
need. You may not like it (and I can't say I blame you),
but that's how it is.

- quote -

What the voters will put up with, subject to limits the
courts have laid down, like people can't be taxed to vote,
or that taxing some types of books more than other types of
books is illegal (First Amendment violation), etc.

- quote -

And property taxes and income taxes aren't?

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

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Darryl <DarrylJ[at]yahoo.com> wrote:

- quote -

The state's police keep me from hitting you over the head
and taking the bracelet. The state's fire department helps
keep the bracelet from burning down. So the state _is_
assisting you with the bracelet.

- quote -

Because they can.

- quote -

Not very much.

- quote -

The first, probably not, under privacy laws; the second, yes.

- quote -

Huh? Isn't the use tax the same rate as sales tax? So
you're not being "punished" any more than you would if you
bought from an in-state store.

- quote -

It's the transaction that's taxed.

Besides, some states have personal property taxes, in which
case you'd pay a percentage of the value every year.

Seth

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"Darryl" <DarrylJ[at]yahoo.com> wrote

- quote -

The law does not have to have, and often does not have,
reason behind it.

- quote -

I doubt any state taxes the mere storage of goods,
especially thiose bound for resale elsewhere.

- quote -

Actually, there are not many limits on what the government
can tax.

- quote -

Oh please.

--
Paul A. Thomas, CPA
Athens, Georgia

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"Darryl" <DarrylJ[at]yahoo.com> wrote

- quote -

Usually when taxation and logic coincide, it is by accident!

In this case, however, the logic is that if there was not a
use tax, every economically rational person would buy from
an out-of-state source.

Dick

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I understand the justification for sales tax: the state (
through its fire, police, licensing, & anti-fraud
enforcement, among other things) helps to provide a stable
environment in which business can be conducted more
profitably.

I don't understand why a state is legally entitled to a use
tax. If I order a bracelet from Arizona, made in Mexico,
using a credit card based out of Delaware, & sent to me with
a federal mail system, what exactly did I receive from my
state that warrants them taking 6% of the cost of the
transaction + shipping?

I understand that it's a tax on the "use, storage, or
consumption of goods within the state". In no way does the
state enable or assist me in the using, storing, or
consuming, so why would a state be entitled to TAX such a
thing? If they can, then are there actually any limits to
what they can tax? Can a state tax each act of married
intercourse, or children's birthdays every year?

It just smacks so heavily of serfdom, of being punished for
not buying from the "company store", that it seems
antithetical to the whole American concept of being secure
in your home.

I've heard use taxes were allowed by the US Supreme Court;
I'm hoping someone might know the arguments used at the
time.

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