If you’re one of the thousands of Idaho residents who go online to buy things, you’re probably one of the thousands of Idahoans cheating the state out of money.
The state has a little-known – and frequently ignored – companion to the sales tax called the use tax. It’s also hard to enforce, as residents are entrusted with self-reporting their purchases.
“Many people don’t know about the use tax,” said Randy Tilley, who is the administrator of the Idaho Tax Commission’s Audit Division.
The tax has been in effect since 1965, when Idaho first started collecting a sales tax.
Unlike the sales tax, which is collected by businesses at the time of purchase, residents have a form to file, Form 850-U, or they may pay the use tax as a part of their state income tax return.
Here's a quick primer on how it works:
The use tax initially was supposed to keep people from going across the state line to Oregon or Montana, which do not have a sales tax, or to slip the tax noose on mail-order and catalog purchases. It now includes online purchases from out-of-state businesses; in-state businesses are mandated to charge Idaho residents the sales tax on online purchases.
“It’s an important tool to make sure that Idaho retailers can compete fairly with out-of-state companies that don’t charge tax,” Tilley said.
Some states, such as California, are getting more aggressive about the use tax, sending stern letters to residents reminding them of the obligation to pay the tax as well as working on deals with companies such as Amazon to either collect or report the taxes the state is owed.
In Idaho, tax commission officials estimate the state is losing as much as $46 million a year from people not paying the tax.
Last year, 9,600 of Idaho’s 1.6 million residents paid the state $544,000 in use taxes.
The use tax is the same rate as the sales tax, 6 percent.
Copyright 2014 Boise State Public Radio