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Author: redlenses Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121572  
Subject: Avoiding sales tax on new car Date: 1/2/2002 5:23 AM
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Ok here's my situation:

I have a father that lives in Oregon, I live in California. Oregon has no sales tax, California has 8% sales tax. I want to buy a new car in Oregon to avoid the sales tax. What can I do to get around use taxes, etc...

Can I have my father buy the car and then sell it to me for a lower price to lower the taxes when I register it in California?

Can I buy the car and register it in Oregon? When would I have to switch the re3gistration to California and would I have to pay tax at that time?

I'd appreciate any advice on how to avid as much sales/use tax as possible for this situation.

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Author: joebedford Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56612 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 9:16 AM
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I am pretty sure that you can buy the car in one state and register it in another, simple as that. I was told I should have driven to Georgia to buy my last car due to the savings. I mean, if you buy, say, clothes in a state that doesn't charge sales tax on clothes, then you don't pay the tax regardless of where you live, or where you wear the clothes. If cars are different, I am ignorant of it. I'll bet any car dealer could tell you for sure.

Thanks!
Joe

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Author: yankeesmyteam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56613 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 9:28 AM
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There is a use tax, meaning you are supposed to pay tax on the state in which you use the car. Keep in mind if you are paying cash it would be a lot easier to get around it, but if you are financing it where are you going to send the statements, to the state in which you live where you pay tax, hhhhhmmmmmmmmmmm?

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Author: irasmilo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56614 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 9:41 AM
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I mean, if you buy, say, clothes in a state that doesn't charge sales tax on clothes, then you don't pay the tax regardless of where you live, or where you wear the clothes. If cars are different, I am ignorant of it. I'll bet any car dealer could tell you for sure.

Actually, you do. Most (all?) states which have a sales tax, also have a use tax which you are expected to pay on taxable goods and services purchased out-of-state. You are given a credit for the sales tax paid to the state where purchased. Just because few people, in practice, pay the use tax, doesn't mean it doesn't exist.

Additionally, cars are different. Since you have to register the car with the state, it knows you have purchased it. Many states ask to see the purchase receipt to confirm that sales tax has been paid. Again, if purchased out-of-state, most states will credit you with the sales tax already paid, but if your state's sales tax rate is higher, it will assess you the difference.

Ira

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Author: LoTax One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56616 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 10:56 AM
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"If cars are different, I am ignorant of it." Yep, you're right about that.

LoTax

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Author: robin0208 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56638 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 4:40 PM
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You may want to check your state tax instructions/forms. I'm not sure how (or even, if) the information is shared across state lines, but I recall that my CT tax form specifically asked whether I had purchased anything (major) in another state on which I hadn't paid CT sales tax. I do know that state taxing authorities share lots of info with one another ...

Best of luck.

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Author: redlenses Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56649 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 9:32 PM
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>Additionally, cars are different. Since you have to register the car >with the state, it knows you have purchased it. Many states ask to see >the purchase receipt to confirm that sales tax has been paid. Again, >if purchased out-of-state, most states will credit you with the sales >tax already paid, but if your state's sales tax rate is higher, it >will assess you the difference.

So going back to my original question, can I have my father buy the car then sell it to me to avoid the use tax? i.e. dad buys a $20,000 car, sells it to me for $1,000.




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Author: amrtaxcom Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56652 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 9:43 PM
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So going back to my original question, can I have my father buy the car then sell it to me to avoid the use tax? i.e. dad buys a $20,000 car, sells it to me for $1,000.
The simple answer to your question is no. When you register the vehicle in your state, it does not matter where or from whom you purchased the vehicle. Most if not all states value the vehicle indepently of the purchase price or use a sliding scale to determine the minimum use/sales tax the state will charge before allowing you to register the vehicle. This prevents the old "buy a used car from a private party for buck routine." Not to mention the fact that in your scenario Dad will bear the burden of sales tax in his state unless he can prove to the dealer the vehicle is going out of state. Check with your local state's DMV to avoid further conjecture.
James Mulligan

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Author: LeoKam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56656 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/2/2002 11:31 PM
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In a way. You need a title to rergister the car with the state inorder to get license plates for it. Which means your dad needs a title to sign over to you first before you can apply for a title and plates in your name. Which means that, before he gets the title, he has to pay sales/use tax on the $20,000 he paid for the car from the previous owner. There's really no way to get around paying the tax if you want to title the car and get license plates.


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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56665 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 1:50 AM
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redlenses: "So going back to my original question, can I have my father buy the car then sell it to me to avoid the use tax? i.e. dad buys a $20,000 car, sells it to me for $1,000."

All of which begs the question of why Dad would want to spend 20k plus TTL in order to sell you a car for $1,000, and probably creating a gift that requires Dad to file a gift tax return and use of part of his lifetime exemption.

Lots of good responses from other posters, just not what you wanted to hear. Why not just pay the d@mn tax instead of wasting so much time trying to accomplish the impossible? Or move back to the state without sales tax if paying it bothers you so much.

Regards, JAFO





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Author: Mark0Young Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56669 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 2:31 AM
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About 25 or so years ago I lived in California and I purchased a car from my parents. When Father started looking at the form to figure out teh sales tax, selling cars between immediate members of the family was specifically exempt from sales tax.

So you might want to double-check to see if that exemption is still there.


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Author: ToddTruby Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56676 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 9:03 AM
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You know, there is probably a way to make this work, but what it amounts to is fraud. I am all for minimizing expenses and especially taxes, but I draw the line when it becomes fraud.

The taxes you pay as a resident of California directly benifit you and your fellow Californians. You chose to live in California and you should pay your fair share of taxes. If you think they are too high, move somewhere else or lobby your legislature or support candidates that will lower taxes.

tjt

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Author: WalStMonky Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56688 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 10:57 AM
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"So going back to my original question, can I have my father buy the car then sell it to me to avoid the use tax? i.e. dad buys a $20,000 car, sells it to me for $1,000."

Check with your state. In VA you can do a vehicle transfer between related parties for 0 and avoid the sales tax. Of course the vehicle was already registered in VA when I transferred title to the Mrs, it could be different for out of state. Call your DMV and ask. "My dad who lives in Oregon wants to give me a car. What's the deal?". Doesn't the People's Republic of California require a ton of extra exhaust equipment as well?

BTW, it could be a pretty serious infraction if you fib to avoid the tax. State legislatures are known to write punitive laws wrt people who try to steal "their" money. You would be smart to comply with the law IMO.

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Author: LeoKam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56698 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 12:59 PM
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I doubt it. 25 years ago in Illinois, no sales tax was charged if you purchased the car from a private party. 10 years ago my dad gave me his car because he wasn't able to drive anymore. GAVE me, not sold, and the state still charged me $15 to register it inorder for me to get license plates.

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Author: joebedford Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56708 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/3/2002 6:55 PM
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Thanks for the thoughtful and enlightening post! The Internet at its best! :-p


"If cars are different, I am ignorant of it." Yep, you're right about that.

LoTax


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Author: yankeesmyteam Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56765 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/4/2002 5:07 PM
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cheapskate fess up and pay your taxes you deadbeat. gee wiz, if you were as creative in your job as you are in ways to try to avoid taxes you would as rich as bill gates.

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Author: redlenses Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56768 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/4/2002 5:40 PM
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> cheapskate fess up and pay your taxes you deadbeat.

Sheesh you say that like being a cheapskate is a bad thing! :)

Thanks to all who actually read the original question and addressed it.

My intent was to explore if it was possible to LEGALLY buy a car in Oregon (which has NO sales tax) and not get hit with tax in California.

For those who shared their "moral" objections to this pursuit, I'd say I disagree with your black and white view of the world, I think the world is much more a mixture of gray than you care to believe... One of the purposes of this board is to know the laws and use them to reduce the amount of taxes you pay to the government.

The amount of time I spent on this: a couple hours
The amount of money it concerned: $1600

Interesting how a question asked on taxes gets more responses concerned with spouting off about how high and mighty people are, instead of providing useful information about the question. I somehow expected more Foolish responses than foolish ones from this board.

Oh well, God Bless America, I'm thankful for the freedom of speach we have, even though it encourages people with nothing useful or insightful to say feel the need to hear themselves talk. Kinda like this little rant of mine :)

Have fun!


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Author: ToddTruby Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 56770 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/4/2002 5:55 PM
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From your original post:

I have a father that lives in Oregon, I live in California. Oregon has no sales tax, California has 8% sales tax. I want to buy a new car in Oregon to avoid the sales tax. What can I do to get around use taxes, etc...

Where is the word LEGALLY mentioned?

Can I have my father buy the car and then sell it to me for a lower price to lower the taxes when I register it in California?


And you think this is honest or legal?

Can I buy the car and register it in Oregon? When would I have to switch the re3gistration to California and would I have to pay tax at that time?

I'd appreciate any advice on how to avid as much sales/use tax as possible for this situation.


If you really thought there was a reasonable and legal way to do this don't you think people would catch on? Do you think you are the first person to realize that tax laws vary in each state?

Quit kidding yourself and the board. You were looking for an easy way to cheat the system. At the expense of all the other taxpayers in your state.

tjt


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Author: Drafthiker Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 57003 of 121572
Subject: Re: Avoiding sales tax on new car Date: 1/9/2002 11:31 PM
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Redlenses:

Maybe you can structure the transaction to be exempt from the tax. You might want to talk to a state and local tax consultant in California and walk through your proposed plans with them. All of the major public accounting firms have people that specialize in sales and use taxes.

By the way, I'm a tax consultant and I have done work in the sales and use tax area before, so I do have some experience as to how they work. Good luck!

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