Sometimes We Tax Ourselves Silly

Do you know that the state sales tax is really the state sales and use tax?

No reason you should: It’s a rarely enforced 1935 law. It says that the tax is applicable not only to items purchased within California but anything bought outside the state for eventual use in California. The idea was to prevent Californians from going into Oregon, which has no sales tax, to avoid the 6% basic California tax. Great for the consumer, yes; but bad for California business.

In practice, the state is not able to collect use taxes on most items purchased outside California. (The major exceptions are boats and motor vehicles, which are taxed when they are registered with the Department of Motor Vehicles.) Imagine the surprise, then, of some 4,000 Californians who traveled abroad last year who--retroactively and without warning--were hit with bills from the state Board of Equalization for taxes on china, cameras, watches and all manner of trinkets purchased in other countries. Under the law, such tax always has been due. But the state had no way of collecting it until officials found out, as they did last year, that they could plug into the U.S. Customs Service computers that keep records of articles declared for customs purposes by returning travelers. The Board of Equalization staff started charging the tax once it found that it has only to punch a button to get the names of the buyers and itemized lists of their treasures.

These lists exist only for those persons who exceeded the limit of duty-free purchases of $400 per person and were honest enough to declare their purchases, therefore subjecting themselves to a 10% federal duty charge. For their honesty, they not only voluntarily paid the duty but then got socked with a state tax bill, too. Those who evaded the law or who bought less than $400 worth did not have to itemize. They could not be assessed the state use tax they legally owed.

California should try to collect a tax whenever it is lawfully due. But it was unfair and imprudent of the Board of Equalization staff to begin socking traveling Californians without warning. The board should halt such collections and refund any taxes paid so far. There is nothing wrong with resuming the tax collection after proper notice is given, perhaps in the form of an information card issued with airline boarding passes when travelers leave the country.

Californians, like anyone, delight in finding bargains during their travels. Getting stung with a surprise tax takes some of the fun--and savings--out of such shopping.