Perhaps you have heard the old saying that nothing can be certain except death and taxes? A few years ago I received a notice that I owed taxes to the State of Tennessee. It was not even the end of January and tax collectors were coming around already?
You see, the great State of Tennessee has no income taxes. The “honkers” take care of that. Every time anyone dares suggest an state income tax for individuals, the tax opponents turn out in force to circle the State Capitol building and honk car horns to express their displeasure. Legislators yield to the pressure of a vocal minority and no new state income tax law is passed.
As a result, the state never has enough money and must think of creative ways to collect revenue. Due to the lack of an income tax, Tennessee has one of the highest sales tax rates in the nation. Unfortunately, imposing sales tax did not work too well either as people simply went online and bought from places like Amazon that did not collect sales taxes.
Therefore, imagine my surprise when I received the email from Amazon regarding my taxes. In short, it went something like this:
Amazon.com is not required to collect sales or use taxes in Tennessee. However, you may owe use tax on purchases you made from Amazon during the previous calendar year. The total sales price of purchases you had was $12.64. This is the amount that you may include on your Tennessee use tax return.
I was not even sure what a “use tax” was. I hoped this didn’t mean that I needed to pack my toothbrush and plan on going to jail for tax evasion. Or, maybe I needed to circle the capitol and honk my car horn. The Tennessee Department of Revenue must stay up nights thinking of ways to collect taxes without having it seem like they are collecting taxes.
The tax rate was 2.50%. Let me see, 2.50% of $12.64 is how much — about 32 cents? They wanted me to file a tax return for 32 cents? Last year my CPA charged over $300 to do my Federal Income Tax return. I couldn’t afford to file another tax return for a 32 cent debt.
The state made it easy for people like me, though. We could pay online. I wondered if they charged themselves a use tax for conducting e-commerce. No, of course not. The state is exempt from taxes. After all, what’s the point of paying yourself? In my case, it would cost more to process the tax than the amount collected.
I tried to follow the online instructions: “Enter a description of the purchase, price of purchase, and the date of purchase. Enter payment debit or credit card.” Could I charge 32 cents on a credit card? If I paid by credit card, they would charge a fee of 2.49%. Using a credit card could double the amount I paid. Maybe I should have given them a break, paid an entire dollar, and told them to, “Keep the change.” Of course, they didn’t give me a break, did they? I sure hoped my 32 cents would balance the budget.
Why did I have a feeling most people were going to ignore this email and pretend it never came? Apparently, that is exactly what happened. Not to be deprived of their due, however, Tennessee passed a law that Amazon.com had to collect taxes at the time of sale.
So, I unpacked my toothbrush and became an honest citizen instead of a tax evader.