Are Interstate Car Sales a Feasible, Good and Legal Idea?

October 26, 2006 3:13 PM

A new car costs, say, $16,000. A state's sales tax is, say, 8.5%. That would add an additional tax of $1,360. Which is about the price of a nice new laptop. Is there a way to do this interstate over the internet to avoid the extra tax?

It's possible to buy expensive things over the internet for delivery, in general, and not get charged sales tax as a result. But for some reason I've been unable to find any information about whether it's possible to do this with a car, or if so, how to go about it.

A car seems like yet just another tangible good. Shippable, even, if necessary. So you'd think this would work. On the other hand, cars do have differences (a little harder to ship; dealerships and licenses and complex agreements between manufacturers and so forth).

Since it seems like it would be totally worth my while to find a dealership just inside the Nevada state line, send them a check, and have them deliver it just inside the California state line (via flatbed tow truck if necessary), am I missing something?

posted by felix to Shopping (20 answers total)

Where I live (Massachusetts), I think you pay taxes when you register the car with the RMV, regardless of where it was purchased.
posted by roomwithaview at 3:15 PM on October 26, 2006

Best answer: When you register your car, you will have to prove that you paid the appropriate sales tax:

Use tax rates vary by county and are generally assessed at the same rate as sales tax in the registered owner's county of residence. When a vehicle is brought to California within 12 months from the date of purchase, use tax may be due. An applicant who purchases a vehicle out-of-state may receive a credit toward the California use tax due for any sales or use tax paid to another state prior to entering California. The tax credit shall not exceed the California tax that is due. For additional use tax information, contact the Board of Equalization online, or by phone at 800-400-7115.

posted by uncleozzy at 3:16 PM on October 26, 2006

Oregon has no sales tax, Washington does. When a Washington resident buys a car in Oregon, the amount of sales tax that should have been charged on the sale of the car is assessed at the time of the car's registration in WA - it's not called "sales tax" but it's an equivalent amount.

On preview, I think WA's is called a use tax, as California's is.
posted by pdb at 3:19 PM on October 26, 2006

Perhaps this is what you're looking for?
posted by roomwithaview at 3:20 PM on October 26, 2006

Best answer: (read all about the California Use Tax)
posted by muddgirl at 3:21 PM on October 26, 2006

Best answer: (sorry to burst your bubble)
posted by muddgirl at 3:22 PM on October 26, 2006 [1 favorite]

Hey, if the non-resident registration fee (which is payed upon registering cars formerly purchased or registered in another state) in California is less than the sales tax, you could move to Oregon, buy and register the car there, then take it to LA and register it in California. Probably won't save you much, though.
posted by muddgirl at 3:25 PM on October 26, 2006

I think California may also have inspections/emissions hurdles that could make it very difficult to import vehicles.
posted by exogenous at 3:36 PM on October 26, 2006

Response by poster: OK, looks like I'm going to be forced to do my patriotic californian duty. Thanks for all the replies!
posted by felix at 3:40 PM on October 26, 2006

A car seems like yet just another tangible good. Shippable, even, if necessary. So you'd think this would work.

It's just too pricey for the state to ignore. $1000 for every car on the road is a lot of tax income. Fortunately for them, they have a gate (the DMV) at which they can make sure you paid. Other high purchases never get seen by the state.
posted by smackfu at 3:51 PM on October 26, 2006

Best answer: You could buy the car in a state that has no sales tax (i.e., Florida or Nevada), register the car in that state and not bring the car into CA until the minimum time for an exemption has passed. That time used to be 90 days, but may have changed since I got out of the car business. It's a simple matter to transfer the registration from NV to CA once you're ready to make the transfer.

My brother sells million dollar RVs and it's a common practice in that industry since the stakes are so high and the tax savings can approach $100,000.00. California dealers of high dollar vehicles often arrange the completely legal (under the right circumstances) out of state delivery as a means of tax avoidance, but an out of state delivery would add more to the cost than what you'd be saving on a $16,000. car.
posted by buggzzee23 at 5:12 PM on October 26, 2006

Hey, if the non-resident registration fee (which is payed upon registering cars formerly purchased or registered in another state) in California is less than the sales tax, you could move to Oregon, buy and register the car there, then take it to LA and register it in California. Probably won't save you much, though.
posted by muddgirl

THere's no need to move. You can even use your California address on an out of state registration, and as long as the vehicle doesn't enter California for the minimum amount of time, you'll owe no California tax once you bring it into CA and re-register the vehicle. And there is a move afoot in the CA legislature to get an exemption for bringing the vehicle into CA for maintenance and repairs.
posted by buggzzee23 at 5:26 PM on October 26, 2006

Same thing happens in Maine. NH has no sales tax on auto sales, so Maine charges it for you when you register. Isn't that nice of them?

If you're buying a car from a private seller, there's a nice way around this. Just have them write a receipt for far less than the actual purchase price. The last car I purchased "cost" $500. That's what the receipt says. You don't believe me? Says it right here on the receipt. Read + Weep, bastards.
posted by Civil_Disobedient at 5:41 PM on October 26, 2006

You could buy the car in a state that has no sales tax (i.e., Florida or Nevada)

Florida has a 6% state sales tax. There's no state income tax, though—perhaps that's what you were thinking of.
posted by oaf at 6:28 PM on October 26, 2006

You know, this thread is dead by all counts, but I can't help posting: What about being a good citizen and just paying the taxes? I mean, you're going to use the roads and other stuff that the taxes go for - it stings, but you went about it the wrong way by thinking it was excessive and avoidable. It's the cost of buying a car, plain and simple. We, as a group of people who need common things, instituted a system that a majority of us agreed to that pays for the stuff we all need. You wouldn't duck out on a $10 dinner check, don't duck out on your share of the highway.

Not to be all moral and preachy, but, come on - stop trying to cheat the rules and just pay up.
posted by plaidrabbit at 8:50 PM on October 26, 2006

What about being a good citizen and just paying the taxes?

I'll tell you why. Because when I purchased my first car, I bought it in NH. Not because I was trying to get out of paying ME taxes, but because I couldn't find what I was looking for (in southern ME) in-state. Had NH a tax to pay, I would have gladly paid it.

But what does ME care whether I paid taxes or not? To put it another way: if I bought my car in Massachusetts instead of NH, I would have had to pay taxes on it. Not a single dime of which would have ever hit Maine soil. Would they charge me again? Nope. So why is it OK for Maine to never see a dime of tax money if it instead goes to MA? The net result is the same for Maine: zero.

No. The reason they do it is because they can. The reason they do it is because the state is trying to artificially prop up its own in-state auto dealers. ME is basically trying to do a run-around of state autonomy by saying, "We know our rules suck, and we acknowledge that you're probably going to go to NH instead if you had the chance, but we can't not charge tax on just automobiles, so instead we're going to make it hurt if you try and exercise your interstate commerce rights." Well, fuck you, Maine. And CA. And WA.
posted by Civil_Disobedient at 9:04 PM on October 26, 2006

Wow. Um. I'm gonna throw my meager, salmon colored hat into this whole thing and just mention, briefly, that maybe states charge sales tax to raise money for goods and services that they provide, and if someone purposefully avoids the sales tax, then the state loses money, which means that they can't provide goods and services, so naturally they do what they can to prevent losing that money.

Or, y'know, maybe Civil D's right and they just hate you. And love their auto dealers. But not in that way. Not that there's anything wrong with that.
posted by incessant at 11:18 PM on October 26, 2006

The last car I purchased "cost" $500.

I seem to remember that the Vermont DMV bases it on the Blue Book value (specifically to foil this, I guess). I had a situation like C_D -- I had just bought a car in MA, and then moved to VT. When I registered it, they told me I hadn't paid ENOUGH sales tax in MA and had to cough up another ~$100.

It is kind of a rip-off to the "innocent victims", but like others have said, it is too huge and amount of money to ignore, so I understand that there needs to be some sort of mechanism to stop fraud.
posted by Rock Steady at 4:08 AM on October 27, 2006

Civil D - every time I've bought a car, I've registered it in a state that wasn't the state I bought it in. Each time, they were able to do it in the dealership, because dealerships are often owned by huge corporations that span multiple states.

Regardless - the dealership gets nothing by collecting taxes on stuff that they don't have to; again, as someone who sold cars, we'd have out of state buyers all the time. As long as they could prove that they didn't need the car titled in TN, we sent them out with a temporary tag and told them to take it up with their financier where the thing would be titled.

Most states, even the ones with ridiculous sales tax rates (TX, FL, NY, TN) usually have a break rate for cars for this very reason.

Lastly, you could just move out of Maine to NH if you think we're better. I personally love it here paying NO taxes outside of gas taxes and the occational room & board tax. Not owning land, I'm doing quite well compared to the 10% in TN I was paying.
posted by plaidrabbit at 4:57 AM on October 27, 2006

As an aside, if you itemize deductions on your income taxes, you might be able to deduct the sales tax on your car, thus taking some of the sting out of paying it; here is the IRS info.
posted by TedW at 7:51 AM on October 27, 2006