Saturday, July 19, 2008

The sales tax sidestep

From the Tribune...
Chicagoan Giao Nguyen thinks it only makes sense for savvy shoppers to try to minimize sales taxes on their purchases. The 32-year-old software developer does that by buying books, consumer electronics and camera equipment on the Internet, where he often pays zero in tax and shipping, compared with the 10.25 percent sales tax he would shell out in Chicago.

"There is little incentive for me to buy locally," he said. "I'm just frugal."

Now, Nguyen is trying to make a business out of it, developing an iPhone application that will calculate sales tax no matter where you are and compare it with other areas.

He may be on to something.

Never has the incentive to avoid sales taxes been greater. Since July 1, Chicago's 10.25 percent tax has had the dubious distinction of being highest in the country, higher than New York, Los Angeles and San Francisco.

Not so fast, warns the Illinois Department of Revenue. Avoiding sales tax by purchasing out of state or on the Internet is fraud, and on the relatively remote chance you're caught, you may have to pay penalties and interest on top of the tax you sidestepped. Illinois has a 6.25 percent use tax on items purchased elsewhere and used in Illinois. So that $300 you spent on Amazon.com—you owe the state $18.75.

"The rationale is to level the playing field and reduce or eliminate the incentive to go somewhere else to buy something," said Mike Klemens, spokesman for the Illinois Department of Revenue. "Your Main Street merchant shouldn't be at a competitive disadvantage."

Most people would agree with that in principle, but when it comes to saving money, their self-interest usually predominates. A 2003 study published in the Journal of Economic Psychology found that taxpayers view tax avoidance very differently from tax evasion, even though from an economic perspective the consequences are identical: less revenue flowing into government coffers.
Via Newsalert!

There's a lot to chew on in that piece so go read the whole thing. And in that brief passage I just posted, I could almost conclude your pocketbooks aren't supposed to win against this sales tax.

No comments:

Post a Comment

PLEASE READ FIRST!!!! Comment Moderating and Anonymous Comment Policy

While anonymous comments are not prohibited we do encourage you to help readers identify you so that other commenters may respond to you. Either read the moderating policy for how or leave an identifier (which could be a nickname for example) at the end of the comment.

Also note that this blog is NOT associated with any public or political officials including Alderman Roderick T. Sawyer!