Use Tax Nightmare Continues

Legislative spending plus depressed tax revenues have generated a budget crunch in Colorado. So you’d expect state government to encourage people to pay taxes, maybe even seem grateful for it, wouldn’t you?

But consider the incentive structure for the “use tax.” If, like most Coloradans, you’ve never heard of the use tax (or if you pretend you haven’t heard of it), then the state does nothing to you, and you go on your merry way.

Because my wife and I paid the use tax, not only for last year but for the past seven years, the Colorado Department of Revenue has sent us three erroneous letters harassing us about paying the use tax. Which we already paid. Here I continue the chronicle from my write up last month.

The last letter is dated June 13 (but received, ironically on June 15, the anniversary of the Magna Carta, which recognizes rights of due process among others). In this letter, Roxanne Huber, Executive Director of the Colorado Department of Revenue, goes so far as to threaten “seizure and sale of your [my!] personal property.”

I did learn from this letter that I made a minor mistake in paying the use tax for the 2009 period. You see, according to Form “DR 0252 Web (12/03/10” (and who hasn’t perused that one for a little pleasure reading), late payments carry a penalty “not to exceed 18% of the tax due, and interest.” I didn’t understand the “and interest” clause. I thought we just owed an 18 percent maximum penalty, so that’s what we paid. But that’s not the end of it.

Form DR 0252 Web refers the reader to (lovely domain) for additional information. I tried “Common Questions,” which contains a section, “Internet Sales — Tax Paid by Purchaser.”

THIS page says that for more information I should see Form DR 0252 (which, you may recall, is where I started), or 39-26-106 C.R.S. and 39-26-202 C.R.S. Luckily, I know how to look up Colorado statutes online. So I went to Title 39, “Specific Taxes,” “Sales and Use Tax,” “Part 2 Use Tax.” But section 202 is “Authorization of tax,” so I turned instead to 39-26-207, “Penalty interest on unpaid tax.”

So what does this statute say? And I quote: “Any tax due and unpaid under this part 2 shall be a debt to the state, and shall draw interest at the rate imposed under section 39-21-110.5, in addition to the interest provided by section 39-21-109…”

In other words, this is not something that any actual human being can follow.

But, according to the Department of Revenue’s June 13 letter, there are actually three different sorts of penalties: “Sales tax – Late filing penalty,” “Penalty-interest,” and “Interest.” In my case these things totaled $28, but for some reason we had received “credit” for an apparently arbitrary portion of this, making our alleged amount due $20.07.

But, as I explained to the Department, we had already paid the full tax plus an 18 percent penalty of $20.61, so we owe (at most) $8 for “Penalty-interest” and “Interest,” for which we wrote a check.

To collect that $8 in “Penalty-interest” and “Interest,” the Colorado Department of Revenue sent and posted a letter, and my wife and I spent a combined 98 minutes responding and then posting our own letter.

The June 13 letter also claims we still owe the entire tax for 2010 (which we already paid), plus a penalty (which we do not owe, because we paid it on time). But for whatever reason, the June 13 letter did not add that amount to the “Amount Due with This Statement.”

Previously I wrote that I feel “a bit like a minor character in Franz Kafka’s novel The Trial.” While I do not wish to compare the seriousness of my situation with that in the dystopian film Brazil, I cannot help also comparing Form “DR 0252 Web” to Form “Twenty-Seven B Stroke Six.” Or, as my wife put it, “I feel like I’m in the Twilight Zone.”

In other words, the use tax is absolutely crazy.


Tony Bubb commented June 16, 2011 at 7:56 AM
Yeah, I’m not surprised. I’ve more or less given up on doing my own income taxes, not because I can’t… I did for almost 20 years…
But the Colorado “Fair Share Division” ends up writing me to tell me that my taxes were incorrectly done in vague and confusing language.
This requires time to unravel that and determine that they have had it wrong, not me, and that I don’t owe anything more.
When you get your taxes done professionally, that service is covered.
Nobody should have to be motivated in this way, but I am. So much for the folks there.