Arizona to Audit Everyone Who Fails to Report Sales and Use Tax?
As a followup to my recent article about paying sales tax for online purchases, I wanted to highlight an interesting article from last summer that a reader named Heather pointed out in the comments section.
In short, Arizona has added a dedicated line to their state tax returns for taxpayers to reporting unpaid use taxes. This isn’t a huge deal in itself, but… According to a local tax pro named Ellen Campbell, the AZ Department of Revenue has been advising taxpayers that anyone who fails to report something on that line will be subject to an income tax audit.
Whether or not this is true remains to be seen, but it’s hard to imagine trying to enforce something like this. Perhaps it will raise your odds of an audit, especially if you fit certain other criteria (e.g., income above a certain threshold), but auditing every single return that fails to report use tax? Seem unlikely, but… Never say never.
Regardless, this is just more evidence that states are getting serious about collecting unpaid sales and use taxes.
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Modified on December 20th, 2011 - 4 Comments
Filed under: Consumer, Taxes
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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4 Responses to “Arizona to Audit Everyone Who Fails to Report Sales and Use Tax?”
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December 14th, 2011 at 4:28 pm
Yes, they are getting serious… Seriously trying to scare you into submission.
December 14th, 2011 at 9:42 pm
I’d think that enforcement would likely cost more than the potential tax revenue they’d raise. Plus, it has to be very difficult to prove use tax violations just by looking at W2s. Finally, not everyone buys across state lines. They’d be auditing a lot of people who do not have a violation and be asking residents to prove a negative.
Put it all together and I seriously doubt this would be the case. People do still vote in AZ.
December 15th, 2011 at 5:47 am
Illinois started the SAME thing on the 2010 state tax return and had us list back to several years. they did take it a step further ’suggesting’ on-line purchases s/b 1% of household income.
Around my area that would be $5000-10,000 spent resulting in a tax (state & local)due of $475-950.
FAT chance for this taxpayer. I almost NEVER shop on line. I prefer to be able to see, touch and feel what I buy. Let them audit me and PROVE I spend >$10/year.
December 15th, 2011 at 10:24 am
By providing a dedicated line, the taxing authorities are creating the opportunity to pursue criminality as opposed to civil penalties. It moves the failure to report from “oversight” — subject to interest and penalties– to tax EVASION– subject to prosecution if they so desire. It ties with the statement you sign at the bottom of the return regarding accuracy “to the best of your knowledge”.
It will prove unsuccessful in enforcement because it will take hundreds of hours of govt worker time to gain a few hundred dollars tax payment. And, if you upset enough people with the needless audits, there will be a change in the elected officials.