Thousands of smokers are getting letters from state and local tax collectors demanding they pay up for their Internet purchases. Collecting sales taxes on goods bought from mail-order and Internet businesses has frustrated state and local governments for more than a decade. The Supreme Court ruled in 1992 that states could not force businesses outside their borders to collect their sales taxes unless the companies have stores or headquarters in those states. The ruling spared such businesses from having to comply with the tax codes of 45 states — and the District of Columbia — that levy sales taxes.
Many states are collaborating on a uniform tax system that would make it easier for online retailers to collect sales taxes on goods they sell. The Streamlined Sales Tax Project would let retailers determine the proper state and local tax rates by entering the customer's ZIP code. The project has been enacted or partially enacted in 20 states.
Sheila Hansen of Manhattan says she got a letter from the city demanding $900 in unpaid taxes on 50 cartons of Kool Milds she bought over three years. Hansen says the city reduced her bill to $750 after she pointed out record-keeping errors. But last week, she got another bill — a $525 claim from New York state. "I was totally shocked," she says. Hansen says she stopped buying cigarettes online and quit smoking before she got the first bill. "My biggest beef is, unless they go after every single person that buys anything on the Internet and doesn't pay taxes, it's not fair," she says. "Right now, they're only targeting smokers." [Sheila, let's leave well enough alone!.]
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