Monday, September 17, 2007

Illustrations and Parables: You can run, but you can't hide

I tripped across this situation when I did this seminar in Washington state. But it's a fairly common practice elsewhere. But I just happen to have a nice picture from that part of the world.

Washington has a pretty high tax rate. Oregon, it's neighbor to the south, across the Columbia River (see picture), has no tax at all. So, if you're thinking about buying, say a big screen TV, and you live in the southern part of Washington, you might just think of going to Oregon to buy that appliance.

A woman in my class did precisely that. Apparently, there are LOTS of appliance stores along the border in Oregon who cater to their friends from Washington. She bought the TV in Oregon and paid no sales tax. Then she brought the appliance home in her car. A few weeks later, she got a letter from Washington advising her that she owed use tax on her purchase.

"How did they find us?" was the question she asked.

I said, "I'll bet you paid for that television by opening up an account at the store. You didn't write a check, use a credit card or pay in cash. Right?"

"How did you know?"

"The store filed a lien on the the TV which is a public filing. These things are now computerized in many states. All the state has to do is search the filings looking for a seller in Oregon with a buyer in Washington. Bingo!"


One more way that you can get caught is when you declare big purchases that you bring back into the US. US Customs shares that information with states.

So as we saw with the Florida story, states may find those big purchases that you thought were tax free. Don't be surprised if one day, you get a letter too.

By the way, searching those public filings would also possibly turn up retailers who may have nexus in the state. So if you are afraid of that particular exposure in states where you do business, you may want to avoid filing a lien.

Sales Tax Guy

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