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Texas folllows California's lead

Discussion in 'Legal' started by R.H. Lee, Apr 7, 2006.

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  1. R.H. Lee

    R.H. Lee Member

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    Uses 'data mining' to collect state sales tax:

    The Texas comptroller's Office suspected for years that well-heeled Lone Star citizens were buying big-ticket private planes out of state to dodge sales taxes. But the tax collector couldn't prove it. Then the agency installed new computer technology that matched federal airplane registrations with state tax records. In just the past six months, Texas has collected $5 million in unpaid taxes from 43 scofflaws.

    As tax season nears its Apr. 15 peak, revenue agencies are reaching for a software tool kit that has long been popular in Silicon Valley and in the back offices of big retailers. A combination of advanced data mining programs and vast repositories called data warehouses is allowing the taxman in about a dozen states to gather and analyze unprecedented heaps of information about individuals and businesses, especially small companies.

    These states, and to a lesser extent the Internal Revenue Service, increasingly rely on such software to help capture a chunk of the more than $350 billion in annual taxes that are owed but never paid. California alone has used such systems to identify 600,000 non-filers and collect an extra $184 million annually. "Business has been using this for years," says Massachusetts Revenue Commissioner Alan LeBovidge. "It allows us to sort data that is beyond human ability to sort manually."

    BEYOND THE TAX RETURN. Until recently, the only data revenue agencies gathered on most taxpayers came from the returns they filed. And while other information was theoretically available, few agencies ever found it because they were saddled with creaky computer systems and a shortage of staffers with the necessary technical skills. "We would try running programs on a mainframe," says Lisa McCormack, area manager for the Texas Comptroller's Audit Div., "but it took forever."

    For now, most state data mining programs simply gather information from other government agencies, such as U.S. Customs and Border Protection and state motor vehicle and employment offices. Some states also tap commercial sources, such as infoUSA (IUSA). They then screen the data to see whether a taxpayer's income and spending patterns match what is reported on returns.

    But a few states, such as Texas, are building more sophisticated data mining programs that will predict taxpayer behavior, much as credit-card companies try to estimate how much consumers will spend over the course of a year. "The capability is there to figure out which taxpayers have the highest probability of becoming noncompliant," says Steven E. Taylor, director of the revenue and compliance team of the data warehousing firm Teradata, a unit of NCR (NCR). Iowa, Massachusetts, and Virginia are also in the data mining vanguard.

    MANY DATABASES. Typically, each state revenue agency will work with one data management company and its subcontractors, drawing from a list that includes Teradata, Revenue Solutions of Pembroke, Mass., and CGI Group of Montreal. The data miners can construct powerful programs that assign each taxpayer the equivalent of a credit score, flagging those who should be targeted for an audit. They can project who is likely to file on time, who won't pay until they get a visit from a collection agent, and even who is likely to declare bankruptcy before paying their taxes.

    For years data mining was too expensive and complicated for states to undertake. But costs have come down, and the processing and storage capacity of the hardware is much greater. At the same time, the latest programs allow users to search multiple databases without having to move massive amounts of information from one computer to another.

    The programs work like this: A tax agency may decide to search state employment records to learn how many workers a pizza restaurant has hired. It then matches tax return information against that of other, similar-size pizza parlors in the same Zip Code. The software is now able to figure out that the shop ought to be reporting, say, $500,000 in sales. If it is not, the business may be an audit candidate.

    TREADING LIGHTLY? The analysis can go even deeper. It can match sales-tax payments from the restaurant with the personal tax return of the owner. It can also check state motor vehicle registrations to see what cars the pizza guy owns. If the pieces don't add up, the auditors may pay him a visit.

    So far, states have avoided routinely searching bank and credit-card databases, fearing a backlash by taxpayers angry at government rooting through their financial records. But eventually, tax agencies may begin to comb through widely available commercial information.

    Business purchasing records may be their first stop. "For the next generation, we'll be able to see how many pizza boxes you order," says LeBovidge. "If someone orders 50,000 boxes and says he only sold 3,000 pizzas, they better be able to show me where the other 47,000 boxes went."

    "MORE LIKE BIG BROTHER." The IRS has fallen behind the state agencies, although it has used some data mining for specific projects. For instance, in 2003 it hired an outside vendor to scrutinize information on 4,000 credit-card accounts to determine whether people were using the plastic to hide income they were stashing offshore. But IRS officials say the agency is not routinely matching tax information with data from other government sources. The IRS, in fact, is just beginning to tap state tax information.

    The blossoming of data mining in tax offices has many privacy experts on edge. "This can be more like Big Brother than legitimate tax collection," says Marc Rotenberg, executive director of the Washington [D.C.]-based Electronic Privacy Information Center. "There has to be oversight."

    To calm those concerns, states insist they have built numerous safeguards to protect the detailed personal information they mine. State employees and private vendors are barred from disclosing the data, contractors cannot resell or reuse the info in any way, and taxpayer information is electronically tagged, so anyone who taps into it leaves a record. Even so, politicians and voters must eventually decide how much intrusion they're willing to live with so that individuals and businesses pay what they owe.

    http://www.msnbc.msn.com/id/12186055/
     
  2. waterhouse

    waterhouse Member

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    I'm so glad this wasn't a thread about Texas school districts banning American flags.

    Interesting note on the sales tax. I know a lot of guys take that into account when buying a gun. Texas law has always said that you are supposed to pay taxes on items purchased out of state. There is even a form to fill out. I've never heard of anyone actually paying.
     
  3. Otherguy Overby

    Otherguy Overby member

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    Just wait

    Small fry like your friends will be left alone until they can be made an example of as "tax cheats."
     
  4. MechAg94

    MechAg94 Member

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    Nice to see some effort into law enforcement instead of saying we need new laws. Might have some laws get more attention as the previous post mentioned.
     
  5. Rumpled

    Rumpled Member

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    CA has added a line on the income tax forms to compute sales tax owed on items bought out of state, catalog sales, internet etc.
    It can be quite significant at 8.25%
     
  6. El Barto

    El Barto Member

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    HA HA HA....Texifornia.

    I just thought that it was funny.
     
  7. Standing Wolf

    Standing Wolf Member in memoriam

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    Well, heck! 49% of the country is capable of committing rape.
     
  8. azredhawk44

    azredhawk44 Member

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    I'll be sure to itemize my midway and cabela's orders nice and neat for them...not.:banghead:
     
  9. SomeKid

    SomeKid Member

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    Isn't it against the constitution for states to interfere with interstate commerce?

    Texas cannot mandate that you pay them a tax on something bought in Arkansas.

    Oh wait, silly me, thinking the Constitution was anything but paper.
     
  10. Beachmaster

    Beachmaster Member

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    This is EXACTLY why I pay cash when I buy my private planes out of state!
     
  11. JoeSF

    JoeSF Member

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    "Texas cannot mandate that you pay them a tax on something bought in Arkansas."


    They call it a sales and use tax here in CA. So if you buy a big ticket item like a boat or an airplane for say 100,000 the state wants 7500 no matter where you bought it. (Unless you leave it out of state for one full year and can prove it.)
    After that they consider it property and want another grand a year to pay for schools etc. and thats on top of the 7,000 starting immediately.
    Was it Jeffersson who said "the power to tax is the power to destroy?"
     
  12. JohnMc

    JohnMc Member

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    Sales taxes on items purchased out of state are "regulation of interstate commerce" and have been found to be such repeatedly by the Supreme Court.
    "Use Taxes" are not.
    So relable a rose, and somehow, it's not a rose anymore. At least according to lawyers, congress-critters, etc.

    This data mining w/out a warrant, to me, constitutes invasion of privacy and should be stopped, IMHO. I don't like telemarketers doing it, I don't like the government doing it.
     
  13. armoredman

    armoredman Member

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    Sales tax twice, once where you bought it, and then a tax to bring it home? This is out of control....Not to far from now we will have a Privlidge to Stay Alive tax, delinquents will be slaughtered out of hand.
     
  14. armorplate

    armorplate Member

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    Unfair taxes

    This is why we have to keep our firearms. The Feds and the states are in the business of making us their slaves. When will the people have enough, and revolt? Lets take back America from greed and corruption that is consuming us before it's too late.
     
  15. R.H. Lee

    R.H. Lee Member

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    The lack of response is interesting. I would have thought that a clear encroachment of the 4th Amendment by the State of Texas would be a cause for outcry. Apparently, only California is subject to criticism by those living in the so-called 'free states'.

    Or maybe the 4th is not as important as the 2nd..............
     
  16. Deavis

    Deavis Member

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    That isn't true. In Texas, if you paid sales tax in another state, you simply file that official receipt when you register it here and they deduct that amount from the sales tax you would owe here. That is why they ask you if you paid sales tax on the vehicle. Bought a car in Florida, paid sales tax on it, paid nothing in Texas except the registration fee.
     
  17. CAnnoneer

    CAnnoneer Member

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    I think the big picture is being missed - at least up to now, and quite possibly in the future, saying that the rich pay any real taxes is a complete and utter joke.

    An acquaintance of mine complained to me just this week that he is "no longer rich enough to pay no taxes" !!! :banghead:
     
  18. mordechaianiliewicz

    mordechaianiliewicz Member

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    Guilty until proven innocent.

    I know someone's quote line reads: Civilization ended in 1913
     
  19. Art Eatman

    Art Eatman Administrator Staff Member

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    Sales tax collection is of no interest to THR.

    Data mining is.

    :D, Art
     
  20. Otherguy Overby

    Otherguy Overby member

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    Guess what, it's tax time. Many states now include a section in their income tax forms regarding out of state purchases. Of course failing to fill that part of the form in and then signing it at the bottom is perjury. Perjury is a felony in many states and we all know what happens to your firearm "rights" when indicted for or convicted of a felony.
     
  21. JohnKSa

    JohnKSa Member

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    Wow...

    Gotta love that. The government working to figure out who is most likely to break the law.

    I guess now that they've caught and punished ALL the criminals they find that they have enough time to start looking for people who MIGHT break the law. :rolleyes:

    Interesting how assiduously the law is enforced when it means revenue for the enforcers.
     
  22. Headless Thompson Gunner

    Headless Thompson Gunner Member

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    That's alright. Bill Clinton proved that perjury is an insignificant and petty little rule that anyone may break whenever it's convenient.

    :D

    (As an aside, I wonder what proportion of the populace has unknowingly committed some felony or another? I'll wager that the IRS and the tax code alone has made unwitting felons out of at least 3/4 of the population.)
     
  23. MechAg94

    MechAg94 Member

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    This sounds like one of those laws that could use some changing. At the very least, they should put a minimum dollar limit on the out-of-state tax requirement.

    Isn't there a federal law provision exempting internet sales from state sales tax? Always buy your airplanes over the internet.

    What I am trying to understand is why a govt agency would need a warrant to review government records? This data mining they are doing is only looking at the records of other agencies. They are looking at tax receipts and airplane registrations.

    Of course, this is yet another reason I don't want the government telling me I have to register my guns. :)
     
  24. mbt2001

    mbt2001 Member

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    There are between 11 million on and 20 million illegal immigrants in this country who pay virtually no taxes and they send out an estimated $80 billion to Mexico and most of that is money that hasn't been taxed. That money is not taxed when it is earned as income and it doesn't stay in the states long enough for it to get into the hands of Walmart or the like, so we lose out on it completely from our revune stream and it is NEVER taxed. Then we give billions to Mexico in loans....

    Seriously... They are busting some people that are not paying taxes, when there is a whole subsect of society that isn't....

    No one says anything about that. Nothing. Why is that?
     
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