Sales Tax?!?

hennydamule · Jul 8, 2004

I've been reading a lot of posts where people have bought out of state and said that they didn't have to pay sales tax. Does anyone know what the true story is with this. My local dealers are telling me that you have to pay sales, no matter where you buy, while I've gotten out of state quotes without sales tax. /forums/images/graemlins/confused.gif

MikePA · Jul 8, 2004

First, welcome to TBN! /forums/images/graemlins/cool.gif

Second, fill in your profile so other TBNers can better answer your questions by knowing what kind of tractor you have, the area of the country you live in, etc.

Third, whether you pay sales tax is a function of the state you live in, the state where you buy and whether or not these 2 states have an arrangement where they report out of state sales to each other. Some states require you report and pay sales tax on any item purchased out of state if the item is brought into the state within so many months of purchase.

In other words, without know the 2 states involved it's impossible to provide a definitive answer.

zuiko · Jul 8, 2004

There is a form you file with your state tax return where you are supposed to report any purchases you did not pay tax on, with some exemption for the first X dollars (here it is $600). The amount you pay is equal to the tax as if you bought it in state.

There have been cases where people have bought from neighboring states and then the state came looking for their tax later. Some states exchange data with their neighbors on out of state large purchases.

MessickFarmEqu · Jul 8, 2004

As a dealer, we run into this mess on a regular basis.

In order to be tax exempt...
1 - you must be an out of state resident
2 - you must take physical delivery of the tractor at your residence and not in the state that the dealer is located (it must be delivered).

Because your not doing business in the state the dealer is located they are not obligated by their state to collect sales tax. Yes, on your state tax forms there is a area to submit your taxes on out of state purchaces. Its your decision if you do this. To my knowledge, states do not report sales to each other and I don't know of any of our customers who have had to remit their tax.

For in state residents, you can also claim farm exemption and not pay the tax. Each state has different requirements for what constitutes farm exempt, in PA you have to do $2500 in bussiness a year and sign a form. No funny ID numbers or anything, just a signature. As a dealer thats all I care about, if the state persues the individual in the event we are audited and they signed the form without being legit its their problem.

Bob_Skurka · Jul 8, 2004

( on your state tax forms there is a area to submit your taxes on out of state purchaces. Its your decision if you do this. To my knowledge, states do not report sales to each other and I don't know of any of our customers who have had to remit their tax.

As a dealer thats all I care about, if the state persues the individual in the event we are audited and they signed the form without being legit its their problem.
)

OK that is the DEALER answer.

The answer from the DEPARTMENT OF REVENUE is that you must pay the tax or you are guilty of tax evasion. Ignorance is no excuse. Interest and penalties can be levied.

The PRACTICAL answer is that you can probably get away with it, but . . . and states are now starting, but it is in the early stages, of sharing information. The internet is really eating away at tax revenues and the states are hurting for income. The states are looking for ways to collect taxes. As Neil pointed out, you signed a form so he is off the hook. But you are on the hook. The question is risk. How much are you willing to take and how far are you willing to stray away from the law.

It gets much muddier if you go pick up your own tractor because some people claim that they have done that and not paid the tax to the state they picked up the tractor in. That can probably get the dealer in a lot more hot water than the customer.

DISCLAIMER: I testify in several states, counties & cities as to the effects of excise taxes on small business and consumers, I am NOT a TAX accountant, I am considered an "expert witness" on the topic in consumer non-durables and have been called upon by several trade associations for my testimony.

Ledgemere Farm · Jul 8, 2004

In NH, there is no sales tax. In NH, there is a furniture store called Green Mtn. Furniture. The State of Maine went in there and audited their book keeping. The State of Maine went away with a list of names of people who did not pay sales tax. Tax evasion is a serious offense and if you are willing to gamble on spending some time in the pen, go for it. The state tax on a 16K tractor is 800 bucks. Is that really worth risking some time in the slammer? Not to mention the moral fact that it is totally dishonest. If you don't pay tax, you are a thief. Plain and simple.

Bob_Skurka · Jul 8, 2004

( If you don't pay tax, you are a thief. Plain and simple. )

And I'm willing to bet that the people who intentionally skip on the taxes are the same ones who complain that they are not getting all the free services from the governement that they feel entitled too!

But that is a whole different thread!!!

hennydamule · Jul 8, 2004

Easy my man! I'm not looking for a way to avoid the tax, I'm just trying to find out what the law is, as I'm not an accountant. I had someone tell me that I didn't owe sales tax, and I wanted to be sure that I didn't break the law.

Bob_Skurka · Jul 8, 2004

( I had someone tell me that I didn't owe sales tax, and I wanted to be sure that I didn't break the law. )

Technically, you don't owe "sales" tax to the state the item is purchased from if the item is shipped out of state (via a common carrier, USPS, etc) to a state that the seller does not operate a physical entity. However, you do owe "use" tax to your home state (the destination state the goods are shipped into) for that same purchase. "Use" tax is typically charged at exactly the same rate as "sales" tax. So the tax would be the same as paying your local sales tax rate.

LEGALLY and MORALLY you could pay the tax to the sellers state, if the sellers state has a lower sales tax rate, and that would be totally legit. For the example of N.H. and I believe Alaska??? where there is no sales tax, you could legally buy the good in that state and bring it home, but you would be doing the transportation, not a common carrier, USPS, etc. I am not up on ALL the state laws, but most states would not be able to come back and charge you the home state tax on a good that you picked up in a different state, if you paid the tax on the good in that state.

MessickFarmEqu · Jul 8, 2004

The States are not as aggressive as Bob makes it sound. If they where really serious about collecting out of state taxes they would be auditing companies like Dell, LL Bean, etc,etc who make a business of selling to out of state customers.

No doubt they are becomming more aggressive about it because of the internet, I spend several thousand a year online and do not ever intend to volentarily remit any of it to the state. I am one of those people who see no return from the taxes I pay. No too long ago there was an article on another website about states who collect this vollentray tax. It said states average a collection of just about 2 million a year.

This is a good discussion to have, has anyone ever had problems?