Tax haven: Connecticut

Although few people know this, you were supposed to be paying taxes for all that stuff you ordered online if you had it delivered to New York State. That whole renewal of a the “tax holiday” for the internet? Doesn’t matter if you live here (or many places, it turns out).

And to make sure that you scofflaws out there who aren’t reporting your online purchases don’t keep doing so, a new law actually makes retailers charge the tax. So when you buy from Amazon, you get sales tax tagged on your purchase. Amazon has sued the state over this tax (saying that it is a regulation of interstate commerce), but for now, I have a more practical issue. There’s nothing that says I can’t go over to Jersey or Connecticut to do my shopping, and no reason I wouldn’t have things delivered there. Indeed, for Amazon, it makes sense for books to go to my office (in Connecticut) rather than my home (in New York). But what happens if I then bring one of those books home?

Or, what about those who do not have a legitimate address in Connecticut? Can they have their orders sent to a rented address (Mail Boxes, etc., etc.) and pick it up once a month. This certainly makes sense to me: the sale occurred “in” Connecticut, and you carried goods you own back to New York. The lines of cars with New York plates at gas stations Fort Lee suggest that many people engage in interstate arbitrage. I’m reminded of the tax hole that exists (existed?) in Portland, Oregon, which is just across the border from Vancouver, Washington. One state is sales-tax-free, the other is income-tax-free, making for an interesting cross-border flow. Yet, there are indications that any such workaround may not be legal.

So, next question. Would it be legal to set up a reshipping service in one of these neighboring states? Could I set up an operation that picks up goods from Newegg’s Edison, NJ warehouse and delivers things around New York City if I wasn’t Newegg. In other words, rather than buying goods delivered from Newegg, I purchase them undelivered (EXW, as it were), and then contract a separate entity to pick them up and deliver them to me in New York. That just feels wrong to me–it seems like it is a fairly direct an obvious attempt to evade a tax by decoupling the purchase and the shipping. And yet, if I hire a taxi to take me from New York City out to an address in New Jersey where I had something delivered, that doesn’t seem that strange, and on a large enough purchase–say, a television or a diamond ring–it would save a great deal in tax. That holds even when it is a question of choosing a sales tax in White Plains (7.88%) or Paramus, NJ (6%, or free for clothing) over that in New York City (8.38%), leaving aside the online issue.

Or, is your tax home determined by where you actually claim residence? That was the case when we bought our car in New Jersey. Because we lived in New York City, we were required to pay NYC tax. But this seems to be specific to automotive purchases.

Anyway, I find the whole thing too confusing. Do I have to worry now that by having books delivered to my office from Amazon, I’m illegally evading tax? Or, should I start having all my friends’ books delivered to my office and charge a “handling fee”? And we haven’t even touched eBay yet.

As an aside, I don’t think that online sales tax is necessarily a bad thing, but requiring online retailers or consumers to keep track of the tax policies of states and municipalities around the world is just stupid. If this is the way we are going, we need a federal “online sales tax”–or better yet, a federal “VAT” for all sales.

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