STATE TAX RETURNS INCLUDE CONSUMER USE TAX FORM

When Missourians open their 1993 individual income tax booklet from the Department of Revenue they are likely to be surprised by a new form included this year -- an individual consumer's use tax return.

And, since most people don't bother to look at their forms for several weeks or let an accountant do their tax preparation, they may be surprised to learn the new form is due Jan. 31. They may also be surprised to know that taxes are even due on magazine subscriptions.

The consumer's use tax is a tax imposed on goods purchased from out of state sellers who are not registered with the state of Missouri to collect the tax. Use taxes are designed to protect in-state businesses who are required to collect sales taxes. On large purchases, not having to pay sales tax provides a significant savings and an incentive to purchase by mail order.

Kay Dinolfo, public information specialist for the Missouri Department of Revenue, characterized the form as "mainly an educational thing this year. We are letting people know it's out there and giving them an opportunity to pay it. We recognize the date can be a problem, but that is a statutory date and we can't change that arbitrarily."

Missouri has had a use tax paid by businesses since June of 1959 that has been paid routinely.

The state can compel businesses to charge sales tax in Missouri if they are located in Missouri or has a "business presence," which would include having salesmen working in the state.

Dinolfo explained that what has led to the enforcement of the individual use tax is a court case: Quill Corp. vs. North Dakota Department of Revenue in May of 1992. "One of the affects of that is the state can request customer listings of businesses that do business by catalog only in the state," said Dinolfo.

Because states can now seek that information, it provides a method for them to determine what purchases were made and who should be paying a use tax.

"The Quill Corp. case has kind of spurned all this activity," said Dinolfo.

Several accountants have questioned whether the Department of Revenue will actually try to enforce payments of the individual use tax, since most taxes due would be only a few dollars.

For example, the state's 5.725 percent sales tax that would be charged would amount to $57.25 if someone made $1,000 worth of out of state purchases that were not taxed. For most people it would be considerably less, though for some it could be considerably more.

Dinolfo pointed out that one of the fastest growing mail order areas is computer software and hardware, which generally are high cost items.

She said the Division of Compliance in the Department of Revenue is trying to make paying the tax easier for everyone and shift the burden to collect to the seller, rather than put the burden on the individual to pay.

Said Dinolfo: "The main thing is to get the customer listing from out of state. There has also been some effort to work with these direct marketing companies to get them to register and collect the taxes themselves, so for the consumer it is no different than going to someplace like WalMart where taxes are added at the time of purchase. At this juncture, a lot of direct marketers are not doing this, and that leaves the consumer liable. So, we are increasing efforts to have the sellers collect."

Tom Higgins, a local accountant, said he made his clients aware of the use tax form in his tax letter, but has gotten only a few calls about it.

"No one has their taxes ready to even work on until the last week of January and very few people even know about the use tax form," said Higgins.

He explained that many people who have their taxes prepared for them only receive a card from the Department of Revenue with a mailing label. They only receive actual tax forms by requesting them.

"Many people will not be aware of the use tax form; they seldom read their card and just know to bring it in with their tax information," said Higgins. "I can see where there is some confusion and people are not going to pay it."

From a practical matter, Higgins said the Department of Revenue cannot afford to devote resources to cracking down on delinquent use taxes because of the small amount of money involved.

"There is not the kind of money there that is involved in something like income tax evasion," said Higgins. "And, since the use tax form is due in January and the income tax in April, they probably would not get connected anyway.

"But for an individual, the way a taxpayer would most likely be discovered not paying the use tax would be during an audit of their Missouri tax return."

While auditing tax returns the revenue department would have access to checks and other records and could easily determine whether use taxes had not been paid.

Dinolfo agreed that many taxpayers will not even be aware of the use tax form until the Jan. 31 deadline is close, or even past.

The use tax return form concedes that the department realizes the deadline may not be met this year.

A line on the form states: "The Department of Revenue recognizes that individuals may not become aware of the Jan. 31, 1994 due date in time to file a timely return. However, the department asks that all individuals complete and mail the return to the Department as quickly as possible."

Dinolfo said the revenue department realizes that there is a delay between the time the tax booklet is received and actually read.

"We're kind of in that lag right now," she said. "We have gotten a few inquiries, but not many yet. Tax professionals have been aware of this and have voiced their comments, but at this point there is not a lot of information out about this and we are trying to get the word out.

"I think we can work with direct marketers and get them to collect the tax, that takes all the burden of reporting and filing returns off the consumer."

According to the Department of Revenue, out of state purchases which could be subject to the use tax include: catalog purchases, magazine subscriptions, cross-border purchases of goods, TV marketing purchases, computer software and hardware, mail-order supply purchases, furniture and equipment purchases from out of state sellers, and purchases of goods bought over the telephone."

Several area legislators said they had not heard complaints from constituents about the use tax return form, but indicated they would look into the matter.

Rep. Larry Thomason, D-Kennett, said many Missouri businesses have complained about the advantage out of state businesses have if they don't charge sales tax.

"In some cases, people are using mail order to avoid paying the sales tax on it, and that does put Missouri firms at a disadvantage," said Thomason. "But we need to have the responsibility for collecting the tax rest with the firm outside the state, not with the individual."