Authoritarian cities and states
BETSY'S PAGE
Here's a little story that, in some ways, exemplifies the authoritarian attitude that some liberals have when they look around for new ways to raise money. The city of Chicago needs more revenue so they've glommed onto a way to get other communities to raise the money for them. They're trying to force car rental companies in other communities to charge a Chicago tax for renting cars.
>>> How would you like to rent a car in Waukegan or St. Charles, only to be slapped with the 8 percent "transaction tax" that applies to Chicago car rentals?
Brace yourself. With a burgeoning $50.5 million budget gap, Chicago is reaching into suburban pockets. And Enterprise Rent-a-Car has filed a lawsuit challenging the Daley administration's effort to collect the tax from drivers who rent cars in the suburbs.
The suit was filed last week in Kane County after an administrative ruling by the city's Department of Revenue that City Hall will "presume" that all car rentals in the six-county area are subject to Chicago's 8 percent transaction tax.
To be excused from the tax, the city is requiring rental companies to photocopy customers' driver's licenses and obtain a sworn statement from customers that they won't be spending more than 50 percent of their time driving in Chicago during the rental period. Without that, the city is demanding the companies collect the tax and turn the money over to the city. Audits will be conducted. At least one is already under way.<<<
This is similar to a plan that Massachusetts has to force New Hampshire stores to collect taxes for Massachusetts.
>>> A sales tax in tax-free New Hampshire?
If Massachusetts has its way, its residents will be paying the Bay State's 5 percent sales tax on certain goods purchased north of the border.
Manchester Mayor Frank C. Guinta called it harassment and promised a fight. Consumers called it a reason not to shop in New Hampshire.
"That would be horrible," said Manfred Herweg, of Groton, Mass., as he slid two big-screen TVs into his car yesterday at Best Buy in Nashua.
The Massachusetts Department of Revenue has ordered Town Fair Tire Centers, a Connecticut-based company with stores in Massachusetts and New Hampshire, to charge Bay Staters a 5 percent sales tax on purchases in New Hampshire. The Bay State requires residents to pay a little-known "use tax" when they buy certain items in New Hampshire for use in Massachusetts.
This case puts the onus squarely on the company.
"The retailer is not in control of what the customer does with the product," said David J. Nagle, an attorney representing Town Fair Tire Centers.
The case, which is pending before the Massachusetts Supreme Judicial Court, has ramifications for companies and consumers alike, said Nancy C. Kyle, president of the Retail Merchants Association of New Hampshire.
"I think it's horrific," she said. "I don't think it's any coincidence that the state of Massachusetts is going after a medium-sized retailer. They're testing the waters to see how it goes and if they win their case, the big-box retailers are next."<<<
So liberal communities who always talk about how they prize privacy now want retailers to intrude into customers' privacy by finding out where they plan to use their purchases. If people behave rationally and travel to localities with lower taxes to buy items then what should high tax communities do? Force those low tax areas to raise taxes and send the money on over.
>>> The issue is not cut and dried, according to Stan Arnold, former commissioner of Department of Revenue Administration and current senior tax policy adviser at the law firm of Rath, Young and Pignatelli.
Contrary to local myth, he said, if Massachusetts residents come to New Hampshire and purchase goods that are taxable in their home state, they are required by law to report taxes they did not pay as a "use tax" when they file their state tax returns.
The use tax is self-reported and hard to track, so there is a very low compliance with the law, he said.
If a company is New Hampshire-based without any presence in Massachusetts, the company is not required to collect sales tax for that state, Arnold said. He said if a company is delivering goods to Massachusetts or performing services in the state, they do have to collect a sales tax.
If the company has stores in Massachusetts and New Hampshire, he said, the company may be required to collect sales tax on goods Massachusetts residents buy in New Hampshire. "That's a narrower call," Arnold said, and probably why the issue is being litigated.
A "big box store" that does business in many states has no obligation to find out where its customers are from or to collect sales tax for another state, Arnold said.
Phil Blatsos, another former DRA commissioner, noted that states are sovereign and don't have to collect revenue for other states. He said states like Massachusetts often put pressure on businesses with stores in both states to collect the tax, but the company has no obligation to do that.<<<
It will be interesting to see how these lawsuits prosper. It seems bizarre for one community or state could force another community or state to collect their taxes for them and to investigate how people plan to use items. What if people lie? Is there going to be some sort of investigatory obligation that the low tax state will have to make sure that people aren't misleading them about where they're buying their tires? This is really on touchy ground in threatening the sovereignty of individual states. But it must drive a liberal community like Chicago or Massachusetts crazy to see people exercising their free will and traveling somewhere else to buy something cheaper.
betsyspage.blogspot.com |
