Rodney Johnson | Tuesday, September 25, 2012 >>

I’m betting that, if you’re like most people, you are a tax cheat.

Don’t take that the wrong way. This isn’t meant to insult anyone or cause anger. We are simply pointing out that most people don’t pay their fair share of taxes and, in fact, are determined in their efforts to keep breaking the law.

I’m not talking about federal taxes, of course… or even state income tax.

I’m referring to sales tax… that very large bucket of cash that keeps many states running, and that happens to be dwindling steadily. While the financial crisis certainly caused sales tax revenue to slide, there is another large reason – taxpayers refusing to make good on what they owe.

And it all begins with online purchases…

For almost two decades, online merchants have relied on a law that says a retailer with no location in a particular state cannot be held responsible for collecting online sales tax in that state.

But there’s a caveat. This law doesn’t say no tax is due. It just doesn’t require the virtual retailer to collect those taxes.

So who does this responsibility fall to?


Consumers, of course. It is up to the buyer to complete a form declaring the amount of purchases made online and then submit the appropriate amount of tax.

Right! Like that’s going to happen.

In the state of Florida the form you’re supposed to use to declare and pay uncollected online sales tax is DR-15MO. Every state with a sales tax has a similar form.

The instructions are clear. If you bought something in another state, like from an online retailer with no place of business in your state, then you must fill out this form that states the amount paid and calculates the amount owed. Then you must submit the form along with the payment by the first day of the quarter following the time of purchase.

You read that right. You must file this form every single quarter if you bought something online in that quarter.

The problem here is obvious, taxpayers are not paying.

This lack of compliance causes several effects. States receive less in sales tax than they should… online retailers can show a cost advantage to consumers… and, of course, consumers save money.

But all of this is about to change.

Amazon, the largest online retailer, has begun charging online sales tax in California. And several other states will bite this tax bullet as of 2013.

The company is painting this as a positive move because it will allow the company to build warehouse facilities much closer to the large population centers in California instead of supplying them from Arizona and Nevada.

And the state of California is pleased about this move because a previously dwindling revenue stream is set to expand.

There is just one group that will not be overjoyed – consumers.

As much as the tax was always the responsibility of consumers, they rarely paid it and states even more rarely demanded it because enforcement was a nightmare.

At the end of the day, this move takes the online purchasing world one giant step closer to full sales tax compliance… and takes more money out of the wallets of consumers.

That means we’ll have even less money to spend on all the big ticket items the Fed is trying to stimulate us into buying, which, of course, will put any meaningful recovery even further into the future. It is as if the different government departments are always working at cross purposes.

I wonder if anyone in the government is paying attention to anything we say… ?


P.S. Actually, it matters not one iota to us if the government listen to us or not. What’s important to us is that you are able to protect yourself as the unstoppable downturn unfolds. The key is income. That’s why Harry has recorded this video for you. Grab a cup of coffee. Get comfortable. And click here.



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Rodney Johnson
Rodney works closely with Harry to study the purchasing power of people as they move through predictable stages of life, how that purchasing power drives our economy and how readers can use this information to invest successfully in the markets. Each month Rodney Johnson works with Harry Dent to uncover the next profitable investment based on demographic and cyclical trends in their flagship newsletter Boom & Bust. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. Along with Boom & Bust, Rodney is also the executive editor of our new service, Fortune Hunter and our Dent Cornerstone Portfolio.