N.Y. has new tax surprise on sales By GLENN BLAIN THE JOURNAL NEWS (Original publication: February 1, 2004) If you did a lot of shopping over the Internet or bought goods outside of New York state during the past year, be prepared to pay more in state taxes when you file your return. Thanks to the 2003-04 budget adopted by the state Legislature, New Yorkers must now declare all purchases made during the year that were not taxed by the state. The list includes online purchases, mail-order buys and goods bought outside of New York. "If you go to Florida and you buy a T-shirt and you bring it back to New York, as a New York state resident, you are supposed to pay New York state tax on it because you use it in New York, but you get a credit for the Florida tax you paid," said Joseph DiBenedetto, an accounting professor at Pace University and an accountant with Steinfink, Napoleon & DiBenedetto in Elmsford. "This is ridiculous, it really is." The state has done practically nothing to publicize the move. But there, on line 56 of the New York state tax form, is an entry for taxes on out-of-state goods. Because most people have only just begun to compute their taxes for the year, the new line item has yet to generate much feedback. However, accountants recently said they are preparing for a blitz of questions and complaints once clients realize what's now required. "This is a tax that people are going to have to pay that they have never really paid before," said Frank A. Pellegrino, 54, a partner in Pellegrino and Sherwin LLP in Hawthorne. "We haven't heard the complaints yet, but I am sure we will. It is a matter of when, not if." Technically, New Yorkers have long been responsible for giving the state any sales or use tax that was not computed at the time they bought an item. Nobody seemed to take notice, however, until the advent of e-commerce and lawmakers realized that millions, perhaps billions, of dollars in possible tax revenue was being lost each year. So with the state in an enormous budget crisis, the Legislature last year saw a chance to generate much-needed revenue. "These are taxes that should be paid," said state Sen. Nicholas Spano, R-Yonkers. "They are just, right now, uncollected." The state's 2003-04 budget, which was put in place by the Legislature after overriding the vetoes of Gov. George Pataki, created the new line item on the tax form. The form and accompanying booklet give New Yorkers multiple options to compute the amount: • Declare no purchases of non-taxed items and list zero as the amount; • Itemize purchased goods and compute the tax owed using the instructions given; or • Estimate the amount using an accompanying chart that is based on adjusted gross income. Under the income chart, a person who earned between $50,001 and $75,000 in gross income would pay $34 in estimated sales tax. For a person who earned $75,001 to $100,000, the amount is $43. "I think it is going to be a problem for both the people who are filing returns and the professional preparers," said DiBenedetto, who is sending a memo to his staff to make sure that they inform their clients about the new requirement. "If you answer that you owe no tax and you do owe tax, you have effectively perjured yourself." Spano said lawmakers realized that the new requirement could inconvenience tax filers, but they hope that it will eventually prompt the federal government to adopt a national system for collecting sales taxes on the Internet and other out-of-state purchases. The Legislature's budget estimated a $25 million increase in revenue during the current fiscal year because of the new requirement. The fiscal year ends April 1. Pataki administration officials, however, are less optimistic, saying they are not counting on any added revenue from the change. They believe many people will ignore the new line item and any money that does come in, will do so after the fiscal year ends. They also made it clear that the Legislature enacted this change despite Pataki's vetoes. "We are getting calls that say 'Where did this come from?' or 'Why are you doing this?' " said Michael Bucci, a spokesman for the state Department of Taxation and Finance. "The bottom line is, we were forced by law to do this."