You could be breaking the law this tax season and not know it.
Tax evasion is a crime and according to one San Diego State University professor, some taxpayers are doing it unintentionally.
“Many, if not most people that fail to pay all or any of their taxes are not even aware that they are doing anything that is illegal,” Accounting Professor Dr. Steven Gill.
According to Gill, one of the main items taxpayers fail to pay is the Consumer Use Tax. The tax was introduced in 2008 as a complement to sales tax and requires consumers to pay a tax on items purchased from out of state vendors.
Consumers are typically subject to Use Tax when they make purchases over the phone, from Internet retailers, mail-order catalogs, or purchases made out of state, Gill said. The tax rate is typically the same as the sales tax rate for the resident making the purchase.
Gill says that individual consumers typically do not keep documentation of purchases made for personal consumption, and because of this, states are finding it challenging to detect and collect unremitted use taxes.
Because so many fail to pay the use tax, the states are losing out. One study prepared in California estimated that California was losing over $1 billion per year because of unremitted use taxes, Gill said. As Internet commerce has increased, the number is expected to rise.
To pay Use Tax, Gill said 23 states have a line on state income tax forms allowing taxpayers to report and pay use tax with state income taxes.
“Many other states offer supplemental use tax forms for consumers that can typically be found on the website of the state taxing authority,” Gill said.