California Starts Fishing For Unpaid Taxes On Web Purchases

The state of California has become serious about getting a slice of consumer retail purchases made online.
Under a deal the state cut last year with Amazon.com, the online retailer on September 15 began collecting sales tax on purchases made by California residents. But the state is taking the campaign to collect a slice of online purchases one step further, sending an ominous sounding warning letter to some taxpayers reminding them that they are supposed to pay “use tax” on purchases made on the Internet.
A spokesman for the state’s Board of Equalization confirmed that it sent the letters to about 27,000 California residents with high incomes who paid no use tax on their 2008, 2009 and 2010 returns.
Here’s a copy of the letter:

Dear Sir or Madam:

Our records indicate that you did not report California use tax on your income tax return or directly to us for years 2008, 2009, and 2010, and we would like to provide you with information about when and how use tax should be reported. You may owe use tax if you purchased books, clothing, electronics, artwork, jewelry, or other items from an out-of-state business (for example, through a catalog or Internet retailer) that did not collect California tax. If the out-of-state retailer did not collect California use tax from you at the time of purchase, then you may be responsible for reporting and paying the use tax.
What is Use Tax?
The use tax, which was created in July 1935, is a companion to California’s sales tax. It is designed in part to promote fairness between in-state retailers who are required to report and remit tax, and some out-of-state retailers who are not. Use tax, just like sales tax, goes to fund critical local services such as police, fire, schools, and parks. The use tax is calculated at the same rate as the sales tax. The Board of Equalization (BOE) website has extensive information about use tax that you may find helpful in determining whether use tax is due on your purchases from out-of-state businesses. Please visit our website for more information at www.boe.ca.gov/taxprograms/usetax/index.html.
How to Report Use Tax
For purchases made before January 1, 2012, you should report and pay your use tax for one-time purchases directly to us using the electronic registration system (eReg) on our website at www.boe.ca.gov/elecsrv/ereg/index.html. On the eReg page, click on the “Get Started” button and select the option “Pay use tax on one-time purchase item(s)” from the Main Menu. For purchases made in 2012 and later, you should be tracking your out-of-state purchases and maintaining complete records to accurately determine and report your use tax due. If you make frequent taxable purchases from out-of-state businesses that do not collect California sales or use tax, you should register with us using the eReg system to obtain a Consumer Use Tax Account. For more information about how to register for a Consumer Use Tax Account, please visit our website at www.boe.ca.gov/info/reg.htm.
You may report your use tax for purchases made in 2012 and later directly to us using our eReg system or, for your convenience, you may report and pay your use tax on your California income tax return. If you elect to report your use tax on your income tax return, you may report your actual use tax liability or use the Use Tax Lookup Table provided in the return instructions. Please refer to the instructions booklet for the details on how to report use tax on your income tax return.
Please share a copy of this correspondence with your tax return preparer. If you have any questions or concerns regarding this letter or any other sales and use tax matter, please visit our website at www.boe.ca.gov or call our Taxpayer Information Section at 800-400-7115 (TTY:711). Customer service representatives are available weekdays from 8:00 a.m. to 5:00 p.m. (Pacific time), except state holidays. 

An interesting question is how the state is supposed to prove that you actually made purchases on the Internet and paid no tax. Amazon, for one, does not provide information to the state on transactions by individual  buyers.
According to the state, total use tax collected in 2010 was about $3.9 billion, but that includes things like private party vehicles purchases where the use tax was collected by the Department of Motor Vehicles. Use tax declared by Californians on their income tax returns totaled a paltry $11 million in 2010.