BURLINGTON, Vt. (WCAX) How much does the state of Vermont know about your online purchases? Right now– not much. But as Cat Viglienzoni found out, that’s changing thanks to a new law. We started digging into this after 20,000 of you got letters saying you might owe the state a “use tax.” We found out it’s partly to get you ready for changes coming next year.
“You start to wonder whether the time that is spent on this issue is worth the benefit it provides,” said Jeff Fothergill, a CPA.
Fothergill has been doing taxes for more than 30 years. He knows Vermont’s use tax is meant to level the playing field for local businesses and make sure that people don’t shop online or across the border to avoid the state’s sales tax.
“Does it make sense? Yes. Does today’s economy and ways of doing business challenge it? Severely,” Fothergill said.
He says people don’t keep records that allow them to accurately tally up the sales tax they owe from online or out-of-state purchases. And he says the “safe harbor” chart the state provides– where people pay a use tax amount based on their income– is too high for some people.
“Their choice basically is pay the unreasonable amount in safe harbor, make up a number, or pay zero and leave it up to the state to chase them,” Fothergill said.
And starting next year, the state can. Up until now, the tax department had no way of knowing how much you spent online. Now, they will. Lawmakers passed a measure that requires online retailers with more than $100,000 in sales to Vermonters each year to report to you and the tax department how much you’ve spent with them. This applies to anyone who’s spent more than $500 with an online retailer. The state hopes you’ll use that information to calculate how much tax you should have paid.
“It is focused on folks with a lot of online activity with larger vendors. The information would be pretty bare-bones, we expect, if it complies with the law which is the name of the retailer, the name of the taxpayer and probably the address. Not what they purchased,” Vermont Tax Commissioner Kaj Samsom said.
It’s put Samsom in a tough spot. He had testified against this to lawmakers.
“But now I have to enforce it,” he said.
Samsom says Gov. Phil Scott, R-Vermont, opposed the data collection, citing privacy concerns.
“There were privacy concerns because if you think about it, just the name of the vendor is a new set of information that Vermonters are not used to the tax department having,” Samsom said.
Fothergill says he’s not sure collecting more data are the answer.
“They don’t know what the answer to this is. And they aren’t going to know,” Fothergill said. “And there’s no way for them to know without unearthing a tremendous amount of data, and even then they probably won’t know.”
The state and Vermonters should get the first round of data from online retailers at the end of January.
The tax commissioner says currently only about 10 percent of people pay the use tax. They estimate about half of taxpayers owe it, though. So about 80 percent of people who should be paying it are not. That’s why the state is making such a big push to collect it because it’s revenue that should be coming in that isn’t.
Samsom said the state is missing out on about $20 million. So even if this effort doesn’t capture all that missing money, they hope to at least get a chunk of it.