Buying out of state to save on sales tax

[nko51]

I recently found out that when you purchase a Rolex out of state to save on sales tax, it may come back to haunt you. The reason being is that just because the AD is not required to charge you tax, does not mean that you do not have to declare it. Recently, an AD was audited by Rolex! no names mentioned, and some out of state buyers names were reported to their respective states. Take this as you may! for what it's worth.

[jeb]

It's still legal to buy most things out of state and not have to pay taxes if they're shipped/delivered to your state. If it's something that needs to be registered, like a car, then you'd still have to cough up the taxes when you go to register it.

I guess there may be some grey area here, though. For example, I know when I buy something from a large national company like IBM, I have to pay my state tax on it no matter where I order it from. Something about if the company has an office in your state, they have to charge you tax. Not sure where that line would be, though. Is any AD considered an official office? Interesting.

Are there some states now collecting taxes for all internet/mail order sales?

[nko51]

Originally Posted by jeb

It's still legal to buy most things out of state and not have to pay taxes if they're shipped/delivered to your state. If it's something that needs to be registered, like a car, then you'd still have to cough up the taxes when you go to register it.

I guess there may be some grey area here, though. For example, I know when I buy something from a large national company like IBM, I have to pay my state tax on it no matter where I order it from. Something about if the company has an office in your state, they have to charge you tax. Not sure where that line would be, though. Is any AD considered an official office? Interesting.

Are there some states now collecting taxes for all internet/mail order sales?

Yes, there are states that have reciprocity for state tax with other states.

[nko51]

Rolex sporatically started to do this because some AD's starting complaining about losing their state base of buyers to other states, because buyers knew they can save on sales tax.

[Arturo]

That is why whenever I am in San Francisco or Seattle and buy a suit of clothes, or nice shoes, I just have them shipped to my office in Oregon. No taxes if shipped to me here. I imagine friends buy things and gift them to other friends all the time up here. I know that the California folks come in hordes from Redding to Southern Oregon's Costco to avoid taxes.

[jeb]

It's certainly a factor when I buy some things, too. The state and local tax here is about 9.5% and applies to everything. I used to live in MN and we go back there fairly often to see family and friends. MN has no sales tax on clothes, food or drugs. So we hit the stores when we're there. It also encourages me to shop online whenever practical.

[nko51]

Example of what PA and Delaware did. People used to buy cars in Delaware to avoid sales tax in PA. PA politicians enacted a law where when you try to register a new vehicle bought out of state, they would charge you the sales tax on the full retail of the car, or else you could not get a registration plate.

[jeb]

Originally Posted by nko51

Example of what PA and Delaware did. People used to buy cars in Delaware to avoid sales tax in PA. PA politicians enacted a law where when you try to register a new vehicle bought out of state, they would charge you the sales tax on the full retail of the car, or else you could not get a registration plate.

I believe every state has that law or some variation of it. I know in MN, if you paid tax on a car, motorcycle, etc out of state, you needed to provide proof of that when you registered it. Then if the other state was, say, 5% and MN was 6%, they'd get you for the extra 1%. I believe they get the 5% from the originating state, too.

So, as I said above, you really can't get away with it on something that needs to be registered.

[Scooby]

Just had that problem here in the Old Dominion state. Bought some nice furniture from NC about 5 years ago. Just got a letter saying I owe the taxes on the purchase. Was supposed to declare all out of state purchases on my state income taxes and pay the difference in the sales tax. Of course, if the out of state tax was higher, they weren't going to reimburse me.

[OysterDavid]

I can only speak for California. According to the tax code, if a citizen buys something out of state, they are supposed to voluntarily 'declare' it to the sales tax authorities and pay the tax.

Naturally, the state wants as much tax revenue as possible, and so it's possible that the tax people make some effort to find the buyers of high ticket items and pursue the sales tax, which by the way, is known in official circles as 'use tax'.

The flip side of course, as pointed out on an earlier post thread here, is that many of us, who will consciously do things to avoid paying sales tax, are often the first to complain and moan when our streets don't get repaved, our libraries are closed more often, our police & fire fighters are under paid and our parks not maintained. So there are unintended consequences.

[Rubenonfire]

In general, I would agree with OysterDavid on this one. In the case of purchasing a relatively (even for us) infrequent expensive luxury item, however, I think ordering online and/or out of state to avoid taxataion is not such a bad idea, putting aside the inherent risks of authenticity, shipping, etc. I will, however, agree, that persistently avoiding paying sales tax for average, everyday expenditures does hurt in the long run more than it immediately benefits, as OD explained, ESPECIALLY when multiplied over millions of consumers. In fact, when I had my BMW shipped from West Palm Beach, I waived the taxes in the state of Florida just so I could pay them when I registered the car here in Arizona...if I am going to pay sales tax, you better believe it's going to be in the state I live in!