It's evading a tax that isn't justified in the first place. Sounds good to me.
Check this out from a post on Macintouch (ouch!):
Jul. 9, 2012
David Charlap
Robert Mohns wrote:
"I live in northern Massachusetts near the New Hampshire border, and Mass residents do an awful lot of shopping over the border in tax-free New Hampshire; you can bet no one reports it. But the state Department of Revenue has gotten savvy to this, and while they don't lay in wait over state lines (they can't -- it triggers the interstate commerce clause and the FedGov takes a dim view of it), they have found another way to collect the use tax..."
Back when I lived in NJ, I remember reading about how New York City would send people to tour the parking lots of NJ shopping malls, taking down the tag numbers of any New York cars. They would send "friendly reminder" letters to these people informing them that they owe New York the difference between NY's and NJ's sales tax rates. Of course, most people threw out the letters.
New Jersey, however, takes the cake, IMO. If you aren't paying any use tax, you must write in "0.00" in the use tax box on your state tax return. Leaving it blank is not allowed and will make them reject your return, even though all the other boxes will be accepted as zero if left blank. The idea here is that if they later decide that you owed use tax, they have your signature, under penalty of perjury, on the form. You can't claim you forgot because you explicitly wrote in "0.00". They can extort all kinds of penalties from you under threat of prosecution for perjury (which could theoretically involve jail time.)
Additionally, NJ's penalties for failure to pay use tax can get astronomical. According to their official statement (
http://www.state.nj.us/treasury/taxation/su_14.shtml), you can be forced to pay:
* A late-filing penalty 5% of the tax due per month it's late up to 25%
* Plus $100 per month additional late-filing penalty
* A late-payment penalty of 5% of the tax due
* Interest at an APR of 3% over prime for every month the tax is unpaid, compounded annually
* And at the end of each year, penalties and interest owed get rolled into the amount owed, with the entire penalty cycle starting over again.
So if you owe $100 in use tax and you choose to ignore it, and they decide to prosecute five years later, they can try to collect:
* the $100 principle
* plus 25% late-filing penalty (compounded each year)
* plus $6000 late-filing penalty ($1200 each year added to the principle - so subsequent interest and penalties will be on top of this amount!)
* plus 5% late-payment penalty (compounded each year)
* plus 6.25% interest (at today's prime rate of 3.25%) (compounded each year)
for a grand total of $12,702.96 owed for that $100 tax you failed to pay.
I've been told by tax preparers that it is common for NJ to detect what they consider to be under-reported use tax and refuse to act for several years, in order to maximize the penalty they can collect when they finally decide to act.
Ignoring use tax in some states can be an incredibly dangerous thing to do.
