Consumerist’s Recession Frugality Tips: Save Money Through Tax Evasion!

April 15, 2009

Recession chic is in, and on Monday Consumerist posted a list of 112 reader-submitted tips for saving money in these lean times. The tips range from the obvious (don’t buy things you won’t use) to the bizarre (run your Ziploc bags through the washing machine and reuse them) to the gross (“sew your own reusable ladies’ sanitary items.”)

Unfortunately, a couple of the tips advise Consumerist readers to avoid sales tax by buying on the internet or in another state. In general, you can’t (legally) save money by doing this. When you buy a product without paying sales tax, you owe “use tax” to the state where you use it, typically at a rate equal to your local sales tax.

Online retailers don’t have to collect sales tax on products they ship to states where they don’t do business. That’s a result of the Supreme Court decision in Quill Corp. v. North Dakota, which held that states can’t make out-of-state retailers collect sales and use taxes, in part because doing so is very complicated: nationally, there are thousands of sales and use tax jurisdictions, so it’s hard to figure out the right sales tax for each buyer.

However, Quill doesn’t mean that you, as a buyer, are off the tax hook. You’re supposed to report those untaxed purchases and pay use tax, generally as part of your state income tax return. If you don’t, you’re evading taxes.

So, Consumerist: I know the recession is bad, but please stop advising people to do disgusting things like evading taxes or knitting their own tampons.

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