NYC Tax Agents Pursue Shoppers Across State Lines

IT'S the season to be taxed. Federal and state tax forms are on the way to the mailboxes of taxpayers in the Big Apple.

But New York state tax agents have been taking unusual steps to collect sales taxes. They have been lurking in out-of-state shopping malls and also plan to search import documents to catch tax violators.

These zealous measures are part of the latest round in the Empire State's ongoing "tax war" with its neighbors, New Jersey and Connecticut. Many New Yorkers have long shopped in the upscale malls of Connecticut - a pattern that displeases New York officials because of lost tax revenues. At this moment, though, most of New York's annoyance has been directed to New Jersey.

Merchants in four areas just across the Hudson River from Manhattan that are designated as "enterprise zones" attracted many holiday shoppers by offering a 3 percent sales tax, less than the normal New Jersey sales tax and 5.25 percent lower than New York's 8.25 percent sales tax. Just before Christmas, New York State tax agents were observed in Garden State shopping malls snapping pictures of cars with New York license plates. New York says it will mail notices to those car owners asking for payment of taxes on "big ticket" purchases made across the Hudson. New York tax officials also have plans to go through lists of overseas retail purchases made by New Yorkers who bring goods through United States customs; state officials are looking for unpaid local taxes on luxury goods, art work, and antiques.

"It would be crazy to have to come back to New York and report every item you buy outside the state - especially if you buy something in New Jersey," grumbles one Manhattan business association official. "This is an example of government so financially desperate that it wants to collect every single penny that it believes it might possibly be owed."

"We know of no other situation within the US where such day-to-day surveillance by tax agents has been under way against citizens shopping across state lines," says an official of the National Retail Federation in Washington.

Virtually every state with a sales tax has also enacted a "use tax" that provides for tax equality on transactions made outside the state by that state's citizens, says Ronald Alt, a legal expert with the Federation of Tax Administrators in Washington. Courts have upheld these use taxes. He suggests that in attempting to collect from individuals, New York's enforcement of the tax may be especially vigorous since states usually only apply it to transactions by businesses.

The "tax war" reflects the underlying tensions triggered by the economic weakness in the nation and region, says Rosemary Scanlon, chief economist for the Port Authority of New York and New Jersey.

New Jersey has been particularly aggressive in wooing businesses from Manhattan; over 40 firms have moved during 1992. That stings, since New York City was particularly hard hit by the slump in terms of lost jobs and revenues.

In the past week or so, the tax-war has cooled somewhat, largely because of complaints from New York State lawmakers worried about negative publicity for their state. Tax officials say they may not send out so many dunning notices as first contemplated.

of 5 stories this month > Get unlimited stories
You've read 5 of 5 free stories

Only $1 for your first month.

Get unlimited Monitor journalism.