Vermont sends letters seeking 6 percent tax from online shoppers
The Vermont Department of Taxes has a bit of an awkward question for you.
About 20,000 Vermonters are receiving letters asking them to double-check their tax returns for the last three years. Have you crossed the border to shop in New Hampshire, or ordered items from an online retailer that doesn't charge sales tax? If so, you may have an obligation to pay Vermont 6 percent. Most Vermonters haven't paid anything.
"I understand it's an awkward thing to have to keep track of," said Kaj Samsom, commissioner of the state tax department.
Vermont's 6 percent use tax is paid directly by consumers for out-of-state purchases that would normally be subject to sales tax if they were bought from a Vermont retailer. Think televisions, alcohol and handbags, but not food or clothing.
Related:Amazon changes course in Vermont
The state is mounting a new effort to collect use tax, and new laws will make it harder for consumers to avoid paying in the future.
Vermont income taxpayers can calculate how much use tax they owe using their own receipts, or they can pay an estimate based on their income. (Samsom, the tax commissioner, says he uses the estimate for his own tax returns.) Only 10 percent of Vermont tax returns include some payment for the use tax, Samsom said.
The use tax is foreign to many taxpayers, said Elizabeth Moulton, who helps low-income and elderly residents prepare tax filings through the AARP Tax-Aid program. She said the program tries to educate new clients on the obligation to pay taxes on out-of-state purchases.
"They usually don’t have any idea whatsoever," said Moulton, who coordinates the AARP tax program in Vermont.
The tax department's mailing campaign is a new attempt at education for people who paid little or no use tax in recent years.
A version of the letter shared by Samsom's office describes the program as an "opportunity to correct" a lack of tax payments. People who pay online through the end of October will not be subject to added penalties.
Samsom declined to say specifically how the department selected which Vermonters would receive the 20,000 letters, saying only that the department used tax payment history, demographic data and geographic data "to focus this where we can make the most impact."
Samsom said people can recycle the letter if they've made a good faith effort to comply with the law.
"It's not an indication that you are on some type of audit list," Samsom said.
Samsom said the letters cost about $1 apiece, and the department has already recouped the mailing costs.
The tax department's recent focus on the use tax is expected to raise about $1.8 million, according to the nonpartisan Joint Fiscal Office. The Legislature has asked the department to increase tax collections this year by about $3.2 million overall.
The 20,000 letters are one way Vermont is trying to keep up revenues as more people shop online.
Amazon agreed to collect Vermont sales tax directly from customers beginning in February.
A new law that took effect this summer requires online retailers to notify Vermont customers who have spent at least $500 in a year that they may owe sales or use tax on their purchases.
Beginning next January, online retailers will also share the notices with the state tax department, which said it plans to use the information for "compliance efforts."
"There is increased attention on use tax," Samsom said, "and there's also going to be increased information as we go forward."
Contact April McCullum at 802-660-1863 or amccullum@freepressmedia.com. Follow her on Twitter at @April_McCullum.
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