Buying Advice Out of State Sales Tax Confusion

[Tomtint]

I may be wrong on most states as far as title, but I think most items financed required a UCC filing with the state. This registers the lien on the equipment.

So for the cash buyer...The financial benefit of buying across state lines would be hard to overlook...Are dealers required to report a local sale to a out of state cash buyer ?

 

[RickB]

I may be wrong on most states as far as title, but I think most items financed required a UCC filing with the state. This registers the lien on the equipment.

I agree but the experts have already spanked me for expressing that opinion.

 

[aczlan]

Except, as has been pointed out before, dealer/manufacturer financing is NOT a retail loan in the traditional sense. If you buy a car, there will be a lien filed on the title and the finance company will repossess the vehicle for non-payment. With the tractor financing agreements/sales contracts - the manufacturer does not hold a lien upon the tractor as collateral for their lending. It is pretty much an unsecured personal loan (unless you purchase the payment protection) and if you fail to pay - the only thing that will happen is they will attempt to get you to pay or send you into collections where the collection agency buys your debt and hounds you while also trashing your credit report/score.

If I financed a tractor today, took delivery tomorrow, I could sell it that day and walk away with cash and NEVER pay the finance company. They do not hold any collateral and that tractor is 'gone'. Where there is no physical presence in a state, physical retailers are not obligated to collect and remit another state's taxes for them.

The piece of equipment is described in the loan paperwork and if you stop paying, they will come retrieve it.
If you sell it without paying off the loan, in many cases it will be flagged as stolen and if it comes in for service (or you give them the serial number to lookup parts), the dealer is required to notify the mothership that they have it.

So for the cash buyer...The financial benefit of buying across state lines would be hard to overlook...Are dealers required to report a local sale to a out of state cash buyer ?

Yes, very few states have an exemption for out-of-state people paying sales tax on something purchased in the state (purchase being defined as ownership transferring in the state that the seller is a resident of).
Thus, Barlow's may not be required to charge tax on a tractor that they deliver out of state (possession changes in a different state and unless their state has a reciprocal agreement with that state on sales tax reporting they don't have to charge or report it), but if the same out of state buyer picks it up at the dealership in person, the buyer would have to pay sales tax because they took possession in a state where Barlow's is required to collect sales tax.

Aaron Z

 

[JethroB]

Short answer...it all depends. Every state has different rules. Generally the burden is on the retailer to collect the appropriate sales tax. If the retailer doesn’t collect them then he is liable for paying the taxes out of his pocket. He must prove that a sale was exempt. Retailers are often routinely audited by their states and these auditors know all the tricks and where to focus their efforts (like big ticket items).

 

[aczlan]

Short answer...it all depends. Every state has different rules. Generally the burden is on the retailer to collect the appropriate sales tax. If the retailer doesn’t collect them then he is liable for paying the taxes out of his pocket. He must prove that a sale was exempt. Retailers are often routinely audited by their states and these auditors know all the tricks and where to focus their efforts (like big ticket items).

Yep and not only are sellers liable for the unpaid tax, there is often a penalty to go along with it.

Aaron Z

 

[ultrarunner]

Short answer...it all depends. Every state has different rules. Generally the burden is on the retailer to collect the appropriate sales tax. If the retailer doesn’t collect them then he is liable for paying the taxes out of his pocket. He must prove that a sale was exempt. Retailers are often routinely audited by their states and these auditors know all the tricks and where to focus their efforts (like big ticket items).

Family business would be subject to these every few years and state auditors would stop when auditors found State owed us money...

Sales that were refunded... etc.

 

[crazyal]

The bottom line is if you have a loan the bank that lent the money has put in place protections so that you can't sell the property without them being paid off. Doing so is actually a crime as the buyer most likely will have to forfeit the equipment which means the seller defrauded them. It's easy for anyone with a little experience to find out about a loan. While for a specific piece of equipment would require the serial number it wouldn't be hard for a state to request all liens reported that are held by addresses of people living within the state's borders. I'm not saying they do it but given the amount of money involved a state easily could do it. They could also go back years, depending on state laws, and compare it to your tax return for the year the equipment loan was made.

Decades ago I bought an outboard motor from a dealer in Canada. To avoid Canadian tax the dealer would finish the sale at the US border. He sold a lot of ATVs this way too. It was a 10 minute drive and at the time the exchange rate was very favorable. Canada has lots of taxes and a US citizen could file paperwork at the border to get a refund it would take time. Avoiding it was much easier. It also made it real easy to avoid state sales tax as the seller was under no obligation to collect any US taxes. I would be surprised if this is still the case. Where there's money there's going to be a tax collector trying to get their hands on their share.

 

[Frankenkubota]

Except, as has been pointed out before, dealer/manufacturer financing is NOT a retail loan in the traditional sense. If you buy a car, there will be a lien filed on the title and the finance company will repossess the vehicle for non-payment. With the tractor financing agreements/sales contracts - the manufacturer does not hold a lien upon the tractor as collateral for their lending. It is pretty much an unsecured personal loan (unless you purchase the payment protection) and if you fail to pay - the only thing that will happen is they will attempt to get you to pay or send you into collections where the collection agency buys your debt and hounds you while also trashing your credit report/score.

If I financed a tractor today, took delivery tomorrow, I could sell it that day and walk away with cash and NEVER pay the finance company. They do not hold any collateral and that tractor is 'gone'. Where there is no physical presence in a state, physical retailers are not obligated to collect and remit another state's taxes for them.

When shopping for late model used tractors I learned about tractors not having titles. Thats why I bought new. Again, just another property tax dodge, good on ya!

I can稚 confirm any of the stories I read but, one after another was about some poor person buying a used tractor only to have it repoed because the previous owner never paid their bills. The one story I remember. I saw someone bought a NEW JD tractor from a JD dealer, paid all cash and got all the documents etc. 1 year later it was repoed.

Turns out the dealer never paid his bills.

I知 sure you know the dealer never owns the vehicle, the bank does. The dealer simply pays short term interest to the bank and parks the vehicle on his lot until the vehicle sells, just like car dealers. If the dealer doesn稚 pay the bank, the bank comes lookin!

That isn稚 going to MAGA

 

[RickB]

I知 sure you know the dealer never owns the vehicle, the bank does.

A well-positioned dealer that happens to have inventory that is unsold when the initial floor plan period runs out will pay that unit off rather than pay interest on it. At that point the machine is in paid inventory and the dealer owns it outright. There are very few dealers without a certain amount of paid inventory.

 

[RSR]

There is a surprisingly easy answer to all of these questions. Pay the tax! It is the law after all.

To quote Seinfeld, "We're living in a society here."

Wouldn't it be great if everyone was more concerned with being honest, ethical, and treating everyone fairly, as opposed to trying to save a few dollars?