In the April 17th issue of BusinessWeek (page 34), there's an article on how the states and IRS are using data-mining techniques to find you. In non-technical terms, the states are reviewing other databases and records to look for something fishy.
Texas, for example, has collected $5 million dollars in the last 6 months by comparing federal airplane registrations with state tax records to find companies that haven't paid their use tax on the planes. Bad, bad companies.
In the past, states didn't have the expertise, staff or equipment to do some of these projects. But now things are getting cheaper, easier and they're outsourcing.
Another interesting scenario was a typical pizza parlor. The state might compare the sales tax returns with the personal returns of the owner with the returns filed by other pizza shops in the area with sales by vendors TO that pizza shop.
It's getting tougher and tougher to fly under the radar.
Here are the states the article mentioned: Texas, Iowa, Virginia and Massachusetts. But beware, your state may read BusinessWeek too!