Warning: Do not read this article unless you, too, want to risk becoming a use tax chump, as I am. The use tax is perhaps the most violated law in Colorado. Hardly anyone even knows about it; far fewer actually pay it.
So what is the use tax? The Colorado Department of Revenue summarizes: “Consumer use tax must be paid by Colorado residents and businesses on purchases that did not include Colorado sales tax, such as those made over the Internet, by mail order, or by telephone.” Some internet sales include sales tax; others do not.
Despite the Department of Revenue’s claim, it is obviously not true that the “tax must be paid,” because it hardly ever is. According to the Census Bureau, around 5,270,000 people live in Colorado, composing around two million households. Of those people, how many do you think bought something from another state that did not include sales tax? My guess is the figure is at least 80 percent. Even a ridiculously low estimate would count several hundred thousand people.
So how many people actually pay the use tax they supposedly “must” pay? Three million? Half a million? Don’t make the Department of Revenue laugh. Todd Shepherd, the intrepid reporter for the Independence Institute, asked the Department of Revenue how many individuals actually pay the tax. The answer for 2012: 1,310.
Now you know why I feel like a chump for paying the tax: The Colorado use tax is a complete joke. I mean, it’s a joke except for that niggling detail that the legislature authorizes your criminal prosecution if you don’t pay it. (Speaking of the legislature, I wonder if all 100 legislators have paid the use taxes they owe.) Because, hey, why worry about a law that technically turns the large majority of Colorado residents into criminals?
Let us return to the figures provided by the Department of Revenue. For 2012, 1,310 people paid the use tax for a total of $2,041,507. An additional 192 people filed the tax with “zero filings,” so a total of 1,502 people filed paperwork for the tax. In other words, 87 percent of all people who filed use tax paperwork owed money to the state government.
Obviously that doesn’t imply that 87 percent of the entire population “must” pay the use tax, but that strikes me as a reasonable estimate. If we count the number of households as the relevant figure (again, around two million), that means that roughly 1,740,000 people owe the tax, whereas 1,310 actually pay it. In other words, something like 0.08 percent of the people who “must” pay the use tax in fact pay it. (The Department of Revenue did not have a reliable estimate for the number of people who legally “must” pay the use tax.)
Or let’s take the number of government employees. According to the Census Department, for 2012 Colorado government paid 54,751 full-time employees and another 46,029 part-time employees. Whatever estimates we use, almost certainly tens of thousands of Colorado government employees are in violation of the use tax laws.
Here’s the kicker. Because I am one of the roughly 0.08 percent of Coloradans who actually pay the use tax, I have been hounded by the Department of Revenue for allegedly doing it wrong. Back in 2011, I wrote about how the Department threatened to seize my property for paying the “wrong” amount of use tax going back seven years.
Then, just last month, a Department of Revenue official called me out of the blue to inform me I had filed my 2013 use tax the “wrong” way (even though I filed it exactly the same way as in previous years). “Kathy,” the woman on the phone (she refused to further identify herself), said I had filed my use taxes wrong and needed to go online and call the general Department of Revenue information line to sort out the matter.
I said, “You understand that something like 95 percent of Coloradans [that estimate probably was high] don’t even pay the use tax, even though the statutes state they’re supposed to? Are you calling all 95 percent of Coloradans who don’t even pay it, or are you just hassling the people who voluntarily pay it?”
Kathy replied, “I think our conversation is over,” and she hung up. (I have not taken further action on the matter.)
The clear message from the Colorado Department of Revenue is that its representatives will go out of their way to make your life miserable if, like me, you decide to become a use tax chump and actually bother to try to comply with this absurd law.
So what has the legislature’s response to all this been? Has it been to expeditiously repeal the onerous and unenforced use tax law that nearly everyone violates? Ha! It has been to try to force out-of-state companies to process sales taxes on goods they sell to Coloradans. That effort, the so-called “Amazon tax,” continues to be tied up in courts. (Thanks to that legislative action and the resulting court proceedings, I can no longer earn money as an Amazon affiliate.) In other words, the response of the legislature has been to attempt to impose taxation (or at least the burdens of processing taxation), without representation. Because, you know, who could possibly oppose that?
Meanwhile, I’ll continue to be a use tax chump. Maybe someone could buy me a T-shirt (just for God’s sake don’t buy it out of state): “I Am the 0.08 Percent.”
Author and blogger Ari Armstrong writes at ariarmstrong.com.