Depending on where they live, travelers may have to fork over as much as 7 percent of the value of their foreign merchandise to their home state, and additional amounts may be owed to county and other local authorities in the form of "use tax," CCH said.

Use taxes are imposed at the same rate as state sales tax, but only on out-of-state purchases. States impose sales taxes when a sale takes place within their borders, but if you buy something out-of-state, bring it home and use it, you are subject to your state's use tax, CCH said. Taxpayers generally get credit for the sales tax paid to another state, but taxes paid to a foreign country don't count for the purpose.

With the growth of e-commerce at the expense of state treasuries, states are looking more and more to their use tax laws as a way of making up for the shortfall, said John Logan, JD, senior state tax analyst for CCH.

"States currently have mechanisms for collecting use taxes from businesses, and they have a legal right to collect use taxes on individual purchasers, if they can document the out-of-state transactions," Logan said. For example, since cars, boats, and travel trailers have to be licensed, their owners are likely to receive a tax bill that they must pay before they can register their property.

Customs declarations can also lead to a tax bill, since the Customs Service routinely passes on to state agencies the information travelers disclose on their customs declarations. Returning travelers may notice posters at airports reminding them of their use tax obligations, and the income tax forms for some states request taxpayers to report their use tax liability. But for many weary travelers, the first inkling that they owe use tax comes in a notice from their state revenue department demanding payment.

Logan noted that many states are becoming more aggressive about collecting use tax, and travelers will simply have to make allowances for that in judging the true cost of foreign purchases.

"You shouldn't try to avoid use tax by falsifying your customs declaration because that can expose you to serious penalties," Logan added. "Just factor in your state's use tax when you go looking for bargains overseas."

-- SmartPros News Staff

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