Buying a Mac in the US and taking it to the UK

TidBITS Talk
13

I, for one, make a point of paying these. Before Amazon started collecting sales tax, that would come to a few hundred dollars every year.

Why?

  • I don’t believe in cheating on my taxes, regardless of how likely I am to be caught.
  • The penalties, should you be found out (e.g. via a random audit) can be orders of magnitude larger than the use tax owed.

For example, here’s New Jersey’s penalty schedule for not paying taxes: NJ Division of Taxation - When to File and Pay. A quick summary:

  • Interest is the prime rate + 3%, compounded annually
    • At the end of each year, any still-due tax, penalties or interest will become part of the balance on which the interest is charged.
  • There’s a late filing penalty of 5% for every month it’s late, up to 25% of the balance owed, plus a possible $100 per month.
    • And don’t forget that all these penalties become part of your balance at the end of every year.
  • If they send your tax bill to a collection agency, then add another 11% to cover that.

So if you were to owe $300 use tax on a computer and chose not to pay it:

  • After one year, you’ll owe: $1610 (more than the whole computer):
    • $300 (the use-tax)
    • $75 late-filing penalty (25% of the balance due), plus
    • $1200 ($100 per month late-filing penalty)
    • $34.50 interest (8.5% prime rate + 3% = 11.5%)
  • And then that total amount becomes the baseline for next year’s interest and penalties, meaning after two years you’ll now owe $3398:
    • $1610 (baseline from the previous year)
    • $403 late-filing penalty (25%)
    • $1200 ($100 per month late-filing penalty)
    • $185 interest

If the state chooses to not audit you for seven years (the maximum if they don’t suspect fraud - even though refusal to pay use tax definitely is fraud), and then hand it over to a collections agency, this is going to come to:

  • $5,839 after three years
  • $9,170 after four years
  • $13,718 after five years
  • $19,925 after six years
  • $28,397 after seven years. Plus the 11% collection agency fee, making it $31,521

All to save $300 in sales tax. Not worth it.

They definitely don’t audit everybody, but there are plenty of random audits every year, and should they choose to do so, large out of state purchases are not very hard to spot. And if they suspect fraud, there is no limit to how far into the past they can choose to investigate. After a few decades, the penalties of a $300 tax bill can add up to more than everything you’ve earned for your entire life.

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