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Newegg customers in Connecticut are receiving tax bills for past purchases

By Shawn Knight · 46 replies
Mar 6, 2018
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  1. Online commerce in the earlier days of the Internet was a bit different than it is today. Up until just a few years ago, there existed an “unfair tax advantage” in which most e-commerce outfits weren’t required to collect sales tax associated with online purchases made out-of-state.

    Simply put, if a retailer didn’t have a physical presence in a state like a storefront or even a distribution center, they weren’t required to collect sales tax on online purchases. The responsibility to pay sales tax on online purchases fell into the laps of consumer, most of whom never bothered to do so and would in fact use the loophole to their advantage. It put major national chains like Walmart and Target at a serious disadvantage.

    As you can imagine, states lost out on hundreds of millions of dollars in sales tax revenue. Now, at least one of them is looking to collect on some of that missed income.

    Officials in Connecticut are turning to online vendors in hopes of collecting sales tax on past purchases. Rather than deal with the matter directly, some vendors are opting to instead share customer purchase records so the state can go after consumers directly. Newegg is reportedly one of those vendors.

    Local CBS affiliate WFSB in Connecticut is reporting that past Newegg shoppers are receiving bills from the state’s department of revenue who is looking to collect sales tax from purchases dating back as far as 2014. Impacted customers will have six to eight months to pay their bills with no penalties although eventually, the grace period will end and harsher penalties could be levied.

    Naturally, some aren’t happy with the unexpected bills.

    Michael-Jared Hunter Gillis told the CBS affiliate that Newegg threw all their customers under the bus, adding that he will not be making a purchase with them ever again. Gillis purchased parts from Newegg to build a computer and also picked up a 65-inch television, all without paying any sales tax.

    “I think 90 percent of people are going to go right to the order total, say, ok, that’s what I have to pay, that’s my bill,” Gillis said.

    It’s a sticky situation for sure although I’m not certain that claiming ignorance of the law is a valid defense. If we’re being honest, nobody likes to pay sales tax but pretending you didn’t notice that no sales tax was collected – especially on big-ticket items – is a bit disingenuous.

    Kevin Sullivan, commissioner of the Department of Revenue for the state of Connecticut, notes that the easiest, fairest and simplest way for this to work is for the retailer to charge the tax, collect the tax and remit the tax. Consumers that make online purchases without sales tax being collected can claim online purchases when filing their taxes each year.

    The matter is specific to Connecticut for now although if successful, I wouldn’t be shocked to see other states take similar action against in-state businesses and / or their customers.

    What are your thoughts on the matter? Should businesses "rat out" their customers like this or should they simply agree to collect tax moving forward and let past purchases slide?

    Permalink to story.

  2. seefizzle

    seefizzle TS Evangelist Posts: 392   +261

    Why do states think they're owed tax money on purchases that didn't occur in their state anyway?
  3. roberthi

    roberthi TS Addict Posts: 326   +83

    "It’s a sticky situation for sure although I’m not certain that claiming ignorance of the law is a valid defense. "

    It's not ignorance of the law that didn't exist at the time. This boils down to a state trying to take back-taxes for something that had no clear regulation. It still doesn't. If I buy something that originates in a state, but the transaction process carries through providers ranging over several states' infrastructure, at which point do the all the states involved start asking for taxes on that transaction? At which point does the citizen cry foul over a blatant cash grab for something that particular state doesn't actually provide or have any real impact from?

    The citizen already likely pays taxes for the infrastructure they're using. This is complete bs by the states. It's the same as charging you taxes to pay for the roads, charging you for the car that you use, and then charging you again for using the roads. It's that last part that doesn't happen (except in toll roads), but those are clearly marked. As it stands, the American citizen got screwed by big banks and real estate years ago and were forced to foot the bill to the tune of hundreds of billions, because the banks, etc. were "too big to fail." Now, we're getting jacked for this too? States can kiss it.
  4. Gov't finances are poorly managed. Thus they need every last penny they can get out of their residents because they're vampiric blood suckers.
    senketsu, Tanstar and psycros like this.
  5. Kotters

    Kotters TS Maniac Posts: 330   +223

    Sales tax is supposed to be collected for purchases. The onus for the collection was not on online retailers. It was on the purchaser. If you elected to cheat the tax system and not report those purchase and pay the appropriate tax, that doesn't mean the tax didn't exist. You just dodged it.

    Whether or not you agree with sales tax at all is another thing entirely.
  6. psycros

    psycros TS Evangelist Posts: 2,321   +1,933

    Nobody dodged any taxes. The sales taxes are collected in the state where the transaction originates and nowhere else. There is no national sales tax and interstate commerce tax is only applied in a handful of circumstances.
  7. Gamblin Man

    Gamblin Man TS Member

    I buy on-line for three reasons:
    1 Cheapest price,
    2 Free shipping, and
    3 No sales tax.
    The on-line vendor who matches those requirements gets my business. Period!
    SirChocula likes this.
  8. Tanstar

    Tanstar TS Evangelist Posts: 656   +200

    I only care about the lowest total price, even if that includes paying for shipping and taxes. It's about the final number.
    SirChocula and Theinsanegamer like this.
  9. Uncle Al

    Uncle Al TS Evangelist Posts: 4,431   +2,888

    The 8th circuit district court has already ruled it is lawful for states to collect taxes from out of state vendors selling in the state but it also ruled against any collection for back taxes. it should be interesting to see how this one plays out ..... of course the state can always ask, but may be powerless to do anything more than that.
    jobeard, Theinsanegamer and Tanstar like this.
  10. Gamblin Man

    Gamblin Man TS Member

    If I lived in Connecticut, I'd send my purchases back to Newegg for a refund!
  11. Tanstar

    Tanstar TS Evangelist Posts: 656   +200

    Most won't know this and the state will illegally get paid taxes from people afraid of having their lives ruined over it.
  12. ShagnWagn

    ShagnWagn TS Guru Posts: 447   +297

    "states lost out on hundreds of millions of dollars"

    How can you "lose" something that was never yours to begin with? So let me get this straight - they want to get a lot more money for no more effort? They want to artificially raise the tax on everything? You realize what this will do to inflation, right? GDP is going to tank.

    So, again, they think I will pay for both taxes AND shipping? Umm, no.

    Do they realize this will kill the shipping industry? Especially the government's own entity - the post office?

  13. Dimitrios

    Dimitrios TS Maniac Posts: 232   +141

    I live in CT and I got it sent to me. I bought a Motherboard, graphics card, and power supply. Our governor can suc* my Dic*!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Look up Malloy. He spent all of our tax money on illegals, refugee's, and has sanctuary cities. ICE can't grab them because they are hiding in New Haven and Bridgeport churches. Malloy promised us tax payers $75 each days before being reelected since we were in a surplus but when he won a second term he said the math was wrong and were are in the red!
    SirChocula likes this.
  14. yRaz

    yRaz Nigerian Prince Posts: 2,648   +1,879

    The big problem with this here is that Connecticut was willing to forget about previous taxes "owed" if Newegg started collecting sales tax on future purchases. Rather than do that, which was a GREAT compromise for all parties involved. However, Newegg decided to screw loyal customers. I will not be doing business with newegg anylonger
    SirChocula and Dimitrios like this.
  15. Theinsanegamer

    Theinsanegamer TS Evangelist Posts: 1,372   +1,503

    So instead of paying for taxes and shipping, what are you going to do? go to a brick and mortar store and pay an inflated price that includes tax and shipping, AND more employee wages?

    Calm down. This wont kill the shipping industry. If taxes killed the shipping industry, they would have killed retail decades ago.

    Also, higher taxes do not cause inflation. Inflation is directly linked to how much money the central government bank decided to put into circulation, and is controlled via interest rates at the federal level. If the federal government doesnt put more money into circulation, collecting more taxes wont magically cause inflation to occur anyway.
    jobeard likes this.
  16. Kotters

    Kotters TS Maniac Posts: 330   +223

    I don't know where to even begin with something as ludicrous and ignorant as this.
  17. Evernessince

    Evernessince TS Evangelist Posts: 3,187   +2,428

    "It’s a sticky situation for sure although I’m not certain that claiming ignorance of the law is a valid defense."

    It isn't the law. States have zero legal grounds to collect tax on interstate purchase. According to the law, the company needs to have a nexus in your state in order to collect sales tax.

    There actually is a clear ruling on this now and at the time the person in this article made their purchase. For a long time now it has been that in order to collect taxes a business needs to have a nexus in the state. A nexus is simply a fancy word for a presence, be it an office, warehouse, or any other building. Newegg did not have that Connecticut and thus are not subject to taxes from that state.

    Do you have a link to that? I find it hard to believe that a court expects smaller sellers to collect the correct amount of taxes for every state and then file tax documentation for all of them and then send the money. That's a completely ridiculous burden for everyone but Amazon and Newegg. This isn't even considering that some states like NY have different taxs based on what county you live in. So what, every person who sells on eBay is now an overnight criminal? That's ridiculous.

    Newegg has gone down the tube ever since they were purchased by that Chinese company (who's name eludes me).

    Your argument against inflation is very simplistic. The government has some power to help shape the value of the US dollar but it most certainly does not control it. There are many factors that go into the value of the US dollar including but not limited to US Economic health, US bond interest rate, Investor confidence, US operations/activities, ect.

    IMO collecting taxes on Interstate taxes is *** backwards. It puts a huge burden on sellers to collect, document, and report the correct tax information for every state and every district within those states. There's also the question of which state deserves the tax money. If you always charge tax based on the state the product is coming from, your home state is never going to see a dime. The inverse situation is also true. This is exactly why the nexus rule was put into place.
    Reachable likes this.
  18. Athlonite

    Athlonite TS Booster Posts: 118   +27

    This is why things like tax whether they be p.a.y.e. or sales tax should be implemented country wide and not left upto individual states to decide what where and when and how much you get taxed so that everyone pays the same no matter where you are in the U.S.
  19. Tgard

    Tgard TS Booster Posts: 95   +35

    Amazon.com has been charging taxes on most of the items I buy for a couple of years now. I don't usually go through Newegg now except for a major computer build which doesn't happen but every few years. I probably don't buy more than 1 item a year from Newegg. Here in NC Amazon already provides the state with a record of purchases and have been doing that for a couple/few years as far as I know. This was inevitable for online retailers to do as far as I am concerned. States are irresponsible with our tax money now and they will find a way to get more of it to make up for their mismanagement. Taxes and death man, taxes and death!
  20. Dimitrios

    Dimitrios TS Maniac Posts: 232   +141

    Yup screwwww Newegg. I had them for 20 years and I'm done with them. You can find most PC parts and if you do there expensive. BESTBUY actually has lower prices and in stock! lol I hate BESTBUY as it is.
  21. p51d007

    p51d007 TS Evangelist Posts: 1,705   +988

    How can this be legal, under the phrase "ex post facto"?
    Something legal, now illegal (so to speak) they are going after?
    Or does this not apply in this case, since the "governments" of
    said states will reap a huge windfall.
  22. DAOWAce

    DAOWAce TS Booster Posts: 279   +41

    Sales tax is garbage (we already pay a large portion of our income in taxes in the first place, ontop of large bills, mortgage/rent, etc.), so avoiding it by buying online has been one of the boons to e-tailers.

    Sadly, the government wants to suck up more money than they deserve, so numerous e-tailers, notably the big ones, have all added sales tax to purchases, even if they have no physical presence in the state.

    Meanwhile, our wages don't go up and the cost of living continues to skyrocket with no end in sight. And the US is still in severe and increasing debt and wants to cut funding for numerous things that help people actually live their lives ontop of all this.

    Think I can safely say %*@# taxes, and the US government.
    p51d007 and cliffordcooley like this.
  23. erickmendes

    erickmendes TS Evangelist Posts: 493   +218

    The only two certains is death and taxes...
  24. taylor1277

    taylor1277 TS Rookie Posts: 19

    First of all, I don't think it shouldn't be the consumer, it should be up to the state to pass the buck on to the proper state. If you buy an automobile in NJ and live in Pa, NJ is responsible for forwarding the sales tax to Pa. Or at least it used to be like that, past experience. And second if I am in one state live in another, do I have to keep track of everything I buy in another state and let my state know. What happens if I am in one state and go to a grocery store and don't eat everything and bring some things back home. Is that legal or illegal? I buy a bag of potato chips in Maryland and I live in Delaware, do I have to pay the taxes to Delaware? Come on if so then there needs to be one flat tax on the internet when someone purchases something and lives in another state then that business needs to retax the taxes to the proper state.
  25. cliffordcooley

    cliffordcooley TS Guardian Fighter Posts: 10,797   +4,604

    There shouldn't even be a sales tax because your income is taxed.
    Theinsanegamer and senketsu like this.

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