Use Tax for a new car purchase in Illinois

August 19, 2009 12:44 PM

Should the dealer have dealt with "Use Tax" when I bought my new car in the same state I live?

I live in Springfield IL. I purchased a car in O'Fallon IL, about 2 hours away in early July. The car was new.

I just got back from vacation to a tax bill for "Use Tax" for my new car. This surprised me. I figured the dealer would have dealt with this as part of the new car transaction/registration process. The amount is not insignificant.

Previously I purchased a new car also in O'Fallon IL in 1996 and I do not recall dealing with this. At the time I lived in Worden IL, though I was attending college in Indiana at the time. The car had an Illinois title, though. I also purchased a new car in Indiana in 2003 when I lived in Indianapolis and don't remember any of this either.

Am I just an under-informed car buyer? Do I just suck it up and pay this tax? Should I put in a complaint with the dealer that they didn't deal with this or anything?

posted by cmm to law & government (8 comments total)

When I bought my car in Decatur, IL the dealer gave me the option to pay the use tax myself or have it rolled into my purchase price. Given the questionable math abilities of the dealership, I opted to pay it myself. I only have to pay .5% of the purchase price, which ends up being about 40 bucks.

I wouldn't worry too much about it, since there's not a lot to be done at this point. Just pay the bill and move on.
posted by ThaBombShelterSmith at 12:50 PM on August 19

You either paid the tax, or you didn't pay the tax, so check your paperwork. Did you pay sales tax at the point of purchase of the car? Did you pay sales tax when you registered the car? If you didn't pay it at either point, you owe the use tax, and you must pay up.
posted by zsazsa at 12:50 PM on August 19

Just to clarify, sales tax and use (or "excise", in my neck of the woods) are 2 different taxes. Here in Massachusetts, excise tax is handled at the municipal level, and doesn't involve the dealership.
posted by jalexei at 12:57 PM on August 19

Did you purchase, or lease? When I last lived in Illinois my understanding was that Use Tax was levied on leases only.
posted by davejay at 1:07 PM on August 19

It was an outright purchase of a new car from a dealer.

I have an ST556 Sales Tax Transaction Return form. It shows I paid sales tax, but it has the Use Tax part blank (0.00) and says "only applicable in some districts". So I guess the dealer just punted and left me to be surprised by the tax bill later.
posted by cmm at 1:52 PM on August 19

This probably doesn't apply as I'm in a different state, but here, "use tax" is the name for a tax on used cars and is equivalent to the sales tax on new cars, (this is to prevent you avoiding sales tax by buying out of state and driving the car home, or by buying from a private seller).

Check your DMV website to find out whether use tax is paid in addition to sales tax, because where I am, it's one or the other, but not both.
posted by -harlequin- at 2:41 PM on August 19

Yeah, I don't think you owe "Use Tax" unless you bought it out of state. It is for items used within the state, but where tax wasn't paid on it. Who is the bill from? Check the addresses, maybe it's a scam.

You definitely owe sales tax, but I'd expect that it was taken care of.
posted by gjc at 5:28 PM on August 19

I used to live in Springfield. When I lived there, I bought a car in Decatur.

Here's how I seem to remember it (hopefully, my memory is not too muddy): The dealer told me that I would owe state sales tax which he could take of. However, he continued, because I lived in Springfield, I would have to pay an additional tax, the city use tax. This, he said he could not process because his business was not in Springfield. However, a bill would be mailed to me a few weeks later. It, in fact, was mailed to me a few weeks later.

Hopefully, this links to the Springfield Use Tax Code


§ 100.43. Tax imposed.
(a) Every user of tangible personal property that is titled or registered with an agency of the State of Illinois to an address within the corporate limits of the City of Springfield, through a sale at retail shall be liable for a tax on the purchase at the rate of 1% of the selling price of that property. Evidence that titled or registered tangible personal property was sold at retail to a person or business using an address in the corporate limits of the City of Springfield for title or registration shall be prima facie evidence that the tangible personal property was sold for use in the city.
(b) For a purchase or use of tangible personal property to be taxable under this article, the tangible personal property must have been purchased from a retailer.
(c) If the property that is purchased at retail from a retailer is acquired outside the city and used outside the city before being brought to the city for use here, the use is nevertheless taxable hereunder. However, the selling price on which the tax is computed shall be reduced by an amount which represents a reasonable allowance for depreciation for the period of such prior out-of-city use.

posted by mathlete at 8:30 PM on August 19