Customs related- Is there anyway that "duty" is not a "tax" really ?

Customs related- Is there anyway that "duty" is not a "tax" really ?

I ask this as I was shocked to get a bill from my state dept of revenue for a couple of machines I imported from Canada a few years ago for "use" tax. As a dealer buying for resale, normally I would be tax exempt, but in this case imported in my name for personal use.

The state FAQ section mentions a credit for sales tax paid to another state, but no mention of federal tax credits..no mention of anything related to sales outside the USA in fact.

Just figured it would be insane to pay customs tax (duty) and state sales tax...but insanity may rule...what say ye ?

(the irony here is the machines were indeed intended for personal use, but a year or two later I changed my mind and sold them both anyway ! So, the "use tax" bill is salt in the wound for being honest about it at the time.. )

These were machines NOT originally produced in North America I take it. ???

Let's just say that the machine in question was a Jap machine.

When it was imported to Canada from Asia - there would have been duty taxed to it at that time and paid to Ottawa. (if applicable)

If that same machine was imported from Asia to the US, a similar duty would have been paid to D.C.

The catch is when running that same machine back/forth accrost the 49th. Yeah - "duty" had been pd on that machine when new, but to the other side of the river. This side had not seen a nickle of it to date.


Of course, if the machine was built on either side of the river, no duty is [supposed to be*] required to cross under NAFTA. And if the machine was made in USA, it is considered bringing it home - even if it is comming in from some far corner of the Earth. And then aggin - no dutys required.


But the title of the post was is a duty not a tax? And I see no way to say that it is enything other than a tax.


* I used a fellers logging equipment repair shop in Searchmont, Ontario for a cpl of days to R and R the tranny in my truck one winter. Noting my business, he was VERY interested in if I could locate him a decent large drill press as the spindle on his old one was about shot. Nothing fancy - but something able to drive a big drill.

The big Allens that I knew of were gone when I went back to look, but I found a dbl spindle press strait out of the 20's I bet. But appeared to be in useable condition. I picked it up for $250.

The next summer I loaded up some 4wheelers and the press and took it up to him. But the border agents wanted to charge me duty on it, but it was clearly some old Yankee POS from yesteryear. Even tho I was not "selling" it, I had to put a value on it, and so I told them $250.

They fussed and carried on that it was werth way more than that! I told them that if they wanted to give me $300 for it, we could set it off right here - right now?

So I pd duty on $250 and drove on.

10/1 odds that $20 or whatever it was went strait into someones pocket. Seen it a few yrs later when we brought a snowmachine that was BUILT in Minnesota and bought new in Ontario (buy where you ride) and brought "home" to the US, my chumm was charged $20 or so and got no paperwerk. I brought mine that was BUILT in Qubec accrost a cpl weeks later with no such fee.


"other" borders are NOT the only ones skimming the system!


Sales tax is waved for "resale" puroposes - only to be pd by the consumer - provided the consumer cannot provide a tax exempt slip. But "duty" should be pd for by whoever is taking it through the chicken coups.


---------------

Think Snow Eh!
Ox

A duty is a tax, plain and simple. In Economics, the formal definition of duty is a tax on material things, as opposed to taxes on people. So duty is just a sub-classification of tax.

Your question seems to imply it does not make sense to tax the same thing twice (at import [customs duty] and sale [sales tax]). But that's not at all unusual.

Remember taxes serve both to generate revenue, but also often to influence behavior. Import duties are designed to influence cross-border traffic, classically to make local industry more competitive than foreign industry. Sometimes the other way around, as is sometimes the case with NAFTA (if not necessarily the intent of the law)

I'd call it a tax or a penalty, whichever. It is a huge source of income for the Fed.

For light reading, download and peruse the 3,500 page Harmonized Tariff Schedule:

http://www.usitc.gov/publications/docs/tata/hts/bychapter/1100htsa.pdf

Hint: The machinery is in section 84 and import from some countries is exempt. The language they use is quite helpful:

Articles provided for in a provision for which a rate of duty of "Free" appears in the "Special" subcolumn of rate of duty column 1 followed by the symbol "A*" in parentheses, if imported from a beneficiary developing country set out opposite the provisions enumerated below, are not eligible for the duty-free treatment provided in subdivision (c) of this note:

Milacron said:

Just figured it would be insane to pay customs tax (duty) and state sales tax...but insanity may rule...what say ye ?

Click to expand...

Insanity rules. Customs duty goes to the federal government, state sales tax to the state. They are different sovereigns. You could ask your tax advisor if you could take the state sales tax as a deduction on your federal return, but you still have to pay them both.


Same reasoning applies to crimes. If you commit an act that is a crime under both federal law and state law, you can be prosecuted in both state and federal court. It isn't double jeopardy because they are different sovereigns. And if the judges are particularly annoyed with you, they can require that your state and federal sentences be served consecutively, not concurrently.

This doesn't happen often because most criminals aren't worth the bother. But it can.

mark thomas said:

A duty is a tax, plain and simple.

Remember taxes serve both to generate revenue, but also often to
influence behavior. Import duties are designed to influence cross-border
traffic, classically to make local industry more competitive than foreign
industry. Sometimes the other way around, as is sometimes the case
with NAFTA (if not necessarily the intent of the law)

Click to expand...

Well said. On the matter of "influencing behavior", I would add that duties
are always intended to discourage purchase of foreign goods.

Keep in mind that Import Duties are often levied at the instigation of special
interest groups, ie: domestic manufacturers/producers. Consider import
duties on steel, automobiles, certain electronics, dairy products and so on.
The Softwood Lumber Dispute between Canada and the US is a prominent
example of an international trade dispute, NAFTA or no NAFTA.

Someone's ox gets gored, they or their lobby group complain to sufficiently
powerful authorities and Shazam !, a duty gets levied to help, as they say,
level the playing field. A Duty is one of the tariffs in the toolkit of Tariff
and Non-Tariff barriers nations can apply in order to protect its domestic
economy and further its international interests. Many countries use such
barriers.

.

EddyCurr said:

Well said. On the matter of "influencing behavior", I would add that duties
are always intended to discourage purchase of foreign goods.

Keep in mind that Import Duties are often levied at the instigation of special
interest groups, ie: domestic manufacturers/producers. Consider import
duties on steel, automobiles, certain electronics, dairy products and so on.
The Softwood Lumber Dispute between Canada and the US is a prominent
example of an international trade dispute, NAFTA or no NAFTA.

Someone's cow gets Mad, they or their lobby group complain to sufficiently
powerful authorities and Shazam !, a duty gets levied to help, as they say,
level the playing field. A Duty is one of the tariffs in the toolkit of Tariff
and Non-Tariff barriers nations can apply in order to protect its domestic
economy and further its international interests. Many countries use such
barriers.

.

Click to expand...

There fixed it for yuh.

I was feeling a bit queezy there for a few minutes.



---------------------

Think Snow Eh!
Ox

Taxes may be for raising revenue, but now are used to control whatever behavior the 'ruling party' finds needing controled. No matter which party is in power the result are the same. What the tax is called makes no difference. I always say "a cowpie by any name still stinks when you step in it." So however it is called, it is a tax.

Krutch

EddyCurr said:

Well said. On the matter of "influencing behavior", I would add that duties
are always intended to discourage purchase of foreign goods.

Click to expand...

Not always. There are sometimes reasons to encourage importation.

Also, in the abstract we tend to assume a baseline frame of reference of zero duties, but in fact such a condition that has not existed for at least a 1,000 years. So the only realistic and relevant baseline is recent past, which is one in which there are a zillion duties. They are regularly tweaked one way or the other to change behaviors, sometimes making importation more favorable, sometimes less (all compared to prior baseline) And of course, duties don't exist in isolation. They exist relative to currency exchange rates and many other things that affect the relative value of goods cross-border.

Your point about interest groups influencing them is certainly true, but it's not much different than how interest groups influence other government policies, although in the case of duties, sometimes the interest in question is a very narrow one and thus very easily and clearly identifiable.

mark thomas said:

... there are a zillion duties...

Click to expand...

Tell me about it. My wife imported some dishes, among other things. HOLY CRAP. Trying to figure out what category they were by color, quantity and type in the set, whether or not there were saucers, country of origin and etc. was daunting. I wouldn't be surprised if the inclusion of a gravy boat made a difference in the duty. From a quick glance, it looks like the machine tool section is easier.

Incidentally, I worked with a division of DHL to do the customs brokering. After it was all said and done, I got a "thumbs-up" and a half-hearted job offer from the agent (won her heart). I had to categorize about 100 very different items out of those thousands of pages. Never again. But if you need to know what category cocoanut-shell change purses are in, I may be able to look up the paperwork.

send the tax bill to forests , he like taxes, let him pay them.

oldbikerdude37 said:

send the tax bill to forests , he like taxes, let him pay them.

Click to expand...

Maybe he's just prepared to pay for his round in the eternal bar party that is life. Why aren't you?

Mark Thomas said:

EddyCurr said:

Well said. On the matter of "influencing behavior", I would add that duties
are always intended to discourage purchase of foreign goods.

Click to expand...

Not always. There are sometimes reasons to encourage importation.

Click to expand...

Encouragement won't come about by levying duties.

However, I think we are off the OP's initial topic which, on rereading his
post, is the Use Tax levied by his state.

Milacron said:

I ask this as I was shocked to get a bill from my state dept of revenue for
a couple of machines I imported from Canada a few years ago for "use" tax.
As a dealer buying for resale, normally I would be tax exempt, but in this
case imported in my name for personal use.

The state FAQ section mentions a credit for sales tax paid to another state,
but no mention of federal tax credits..no mention of anything related to sales
outside the USA in fact.

Just figured it would be insane to pay customs tax (duty) and state sales
tax...but insanity may rule...what say ye ?

Click to expand...

A state-levied Use Tax is unfamiliar to me. I only now know what I read about
it here.


Milicron, from the above, was the Use Tax charged at the rate of the
applicable Provincial Sales Tax in the Canadian province of origin?

.

Ox said:

There fixed it for yuh.

I was feeling a bit queasy there for a few minutes.

Click to expand...

Thanks and sorry !

.

EddyCurr said:

Encouragement won't come about by levying duties.

Click to expand...

You won't encourage import of the specific thing the duty applies to, but my point was that duties don't exist in some academic isolation. They exist within an extremely complex web of duties and other policies affecting incentives, and duties are manipulated in correspondingly complex ways. For example, if you want to encourage import of an item from certain countries, you can raise duties on other countries.

mark thomas said:

. For example, if you want to encourage import of an item from certain countries, you can raise duties on other countries.

Click to expand...

Strange that the USA bangs on about democracy & the free market for the rest of the world, but operates stringent protectionism for it's self.

mark thomas said:

A duty is a tax, plain and simple. In Economics, the formal definition of duty is a tax on material things, as opposed to taxes on people. So duty is just a sub-classification of tax.

Your question seems to imply it does not make sense to tax the same thing twice (at import [customs duty] and sale [sales tax]). But that's not at all unusual.
Remember taxes serve both to generate revenue, but also often to influence behavior. Import duties are designed to influence cross-border traffic, classically to make local industry more competitive than foreign industry. Sometimes the other way around, as is sometimes the case with NAFTA (if not necessarily the intent of the law)

Click to expand...

In Britain we tax taxes
Take fuel


Unleaded Fuel £p/liter

Cost of fuel from Refinery = 44.43p

Cost of fuel from Retailer = 52.63p

Total Cost at Pump = 132.7p

Fuel Duty = 57.95p

VAT @ 20% = 22.12p (Value Added Tax)

total tax = 80.07p

% of Fuel Cost that is Tax = 60%

VAT is levied not on the base fuel price (44.43 x20% = 8.88p)
but on the fuel + fuel duty price = 22.12p, an extra 13.23p/liter

With this system when fuel prices rise, the government gets lots more revenue & the fuel companies get all the flack, a neat trick - yet another stealth tax

john

Long and short of it is that if your state has a sales tax and you buy an item out of state that tax is payable, whether from another state or another country. If you have a resellers number the purchase would be exempt but the tax would be collected and remitted when the item is sold. If you buy for personal use and pay the tax to the state the subsequent sale would not be taxable. In reality the situation is more complicated and depends on what type of agreements your state has with other jurisdictions.

So, for example, if I buy a forklift in the US the simplest solution is just to pay the provincial tax at the border when I bring it home. This works here because the province has an agreement with the federal government to collect the tax for them. If your state does not have such an agreement with your federal government then you must pay the applicable tax to them directly. If I do not pay the provincial tax at the border and it is determined on audit that the fork was purchased for my own use they will levy the tax plus penalties
Bob

USMCPOP said:

Tell me about it. My wife imported some dishes, among other things. HOLY CRAP. Trying to figure out what category they were by color, quantity and type in the set, whether or not there were saucers, country of origin and etc. was daunting. I wouldn't be surprised if the inclusion of a gravy boat made a difference in the duty. From a quick glance, it looks like the machine tool section is easier.

Incidentally, I worked with a division of DHL to do the customs brokering. After it was all said and done, I got a "thumbs-up" and a half-hearted job offer from the agent (won her heart). I had to categorize about 100 very different items out of those thousands of pages. Never again. But if you need to know what category cocoanut-shell change purses are in, I may be able to look up the paperwork.

Click to expand...

I import some fairly specialized wood items (raw material) from Italy. According to the HTS, they are not subject to duty. However, customs always changes the number on my form to laminated wood or some other manufactured item to which duty applies. I kicked about it the first time it happened, and the brokerage agent (FedEx, I think) said, "look, do you want the stuff or do you want it quarantined? Unless you have the time and resources to fight customs, and don't need the stuff, just pay the duty and move on." It's a jack, it feels like having to give all your cash to a Somali border guard, but it's the way it is.

How about "real property taxes" or ad valeorm taxes. I have to pay a tax on all property owned by my business every year. Thats chairs, book shelves, tooling, machines, white board markers, EVERYTHING in the business inventory. Anyone out there in a state that doesn't have this? Yes, I sure might vote with my feet

I suspect that FedEx is doing you a huge favor. Importing untreated wood must be a huge hassle, requiring all kinds of documentation etc etc. I figure you are lucky that customs does not catch on!

On a side note, I find it interesting that people bitch and whine about duty/taxes but will turn around and suggest that high duties and other restrictions on imports would be the solution to all our problems. I guess taxes are ok as long as someone else is paying them???
Bob