Sales Taxes...GOTCHA

[MikePA]

While it's the dealer's responsibility to collect the tax, you might want to visit the Virginia Department of Taxation web site. Specifically, even if the out of state sale, to you as a resident of Olney, MD, was legit then following would appear to apply. The bolding is mine.

IOW, no matter how you cut it, the tax should have been remitted to VA. Either by the dealer or by you since you brought the asset into VA within 6 months of it's purchase.

Of course, in order for you to pay the tax, you would have to fill in the form stating your residence was in MD and now it's in VA.

My advice, send a registered letter, return receipt requested, to the dealer indicating that the enclosed check is for the sales tax on the tractor. Include a copy of your sales receipt to show you are paying 3.5% of the total sale price.

As Sir Walter Scott said, "Oh what a tangled web we weave, When first we practise to deceive! ."


§ 58.1-604. Imposition of use tax

There is hereby levied and imposed, in addition to all other taxes and fees now imposed by law, a tax upon the use or consumption of tangible personal property in this Commonwealth, or the storage of such property outside the Commonwealth for use or consumption in this Commonwealth, in the amount of three and one-half percent:

1. Of the cost price of each item or article of tangible personal property used or consumed in this Commonwealth. Tangible personal property which has been acquired for use outside this Commonwealth and subsequently becomes subject to the tax imposed hereunder shall be taxed on the basis of its cost price if such property is brought within this Commonwealth for use within six months of its acquisition;

 

[crown]

Don't feel bad I bought my tractor in WVA only 20 minutes from my house, I thought I could pull one over on the Commonwealth and did so for about a year when the tax bill arrived in my mail box I paid it and chalked it up to a lesson learned, fortuantly in my case it was the dealer I would have choosen regaurdless of the tax issue.

 

[puter]

Duane -

My familiarity is with NY's sales tax procedures, but I assume VA is similar. Your dealer, by state law, is likely obligated to collect and remit sales tax for all taxable purchases except those for which he has received a valid exemption certificate. The sales tax guys can and will hold him responsible for all of the taxes that were supposed to be collected.

That said, YOU are obligated to pay the sales or use tax on the purchases you make. If you can't demonstrate that you paid the tax required on a taxable purchase, you're on the hook.

I work with a guy that liquidates assets seized through the sales tax compliance division. For ~$700 you don't want to take even the remote chance of being on the receiving end of the compliance division's guns... particularly if there's a document out there you signed that can be construed as an attempt to evade taxes.

My suggestion: have the dealer send you a corrected invoice showing what you've already paid and the tax due. Then pay what you owe.

You don't have any other good way out. The key document here is your invoice... if it doesn't show tax being paid on a taxable purchase you're out of luck. It doesn't matter what the dealer said since he has no power to supercede state law.

You could take the dealer to small claims court to recover the sales tax amount, claiming your understanding was that the amount you paid was inclusive of sales tax. But without something written to that effect, and the wrong address on the invoice.... my guess is the judge won't spend 10 seconds on your case.

 

[OkeeDon]

I have a story to tell about state taxes that points out why business owners should traipse the straight and narrow. It's complicated, but I'll try to shorten it.

One of my best friends ran a convenience store and small strip shopping center with a financial partner who was not sophisticated. The partner did not understand accounting and filed a frivolous suit against my friend for mismanagement. My friend counter-sued. During the year-long trial, the Judge forbade either of them from running the store and appointed a trustee to operate it. The trustee failed to pay any state or federal taxes - payroll, unemployment, sales, alcohol and gasoline among them. The Judge failed to adequately monitor the trustee, who pocketed the money.

My friend won the suit and was awarded his partner's share in the business as a judgment. When he resumed operation of the store, he discovered the non-payments and theft. The trustee left the country. The indebtedness was several hundred thousand dollars.

The government agencies did not care about the circumstances; they wanted their money. My friend entered into installment plans and successfully paid off all the federal agencies and some of the state agencies. All that was left was the department of revenue, which handled sales tax. This process took several years, during which my friend voluntarily sold his luxury home, his 32' sport fishing boat and many other assets in order to make these payments.

The sales tax people decided they didn't want to wait any longer for their money, and refused to enter into an installment plan. My friend attempted to sell the shopping center, which had enough equity to cover the amount, but he had fallen behind in the mortgage payments while trying to pay the taxes. The mortgage company foreclosed on the property. The foreclusure sale only brought enough to cover the mortgage. He tried to fight his way out, but the relentless pressure and the refusal to listen to reason finally depressed him to the point where he simply quit coping.

He was arrested, tried and sentenced to two years in jail. He served 11 months and was released to a halfway house on a work release plan. I hired him during that period, and he stayed with me after his subsequent release a few months later. Having him in the business was a daily reminder that all laws must be followed all the time, without exception or temptation. I was absolutely certain that none of the employees, who all knew the story, would even dream of trying to "get away" with something.

My friend was 62 when they incarcerated him; it affected his health, and he died nearly two years ago at age 66, essentially penniless, as he had to pay every extra dime he obtained into a restitution fund. It didn't make any difference to the state that he had never seen a penny of the money and had lost everything; they had their example set.

Do NOT fool around with taxes...

 

[JDgreen227]

I'm sincerely sorry to learn of the death of your friend and his ordeal, but thank you for sharing the story of his experience.

 

[lamarbur]

Just amazing how far things can get. Your friend lost everything over a judge's rule and finally life was shortened.. what ever happen to that judge? Did he/she understand what their ruling ultimately caused?

 

[OkeeDon]

"what ever happen to that judge?"

There's a lot to the story I left out for the sake of brevity. At one time, my friend was chairman of the local Economic Council, president of the Chamber of Commerce, and even ran (unsuccessfully) for Mayor. As a result, all of the judges knew him well and recused themselves. After a delay of nearly a year, they finally succeeded in getting a Judge to hear the case -- a Juvenile Court Judge from another county.

I was there as a character witness. The Judge busied himself with paperwork during the testimony and paid no apparent attention. There was no jury. At closing, the prosecutor asked for two years. The Judge looked up, said, "OK, two years." The gavel came down and my friend was led away in handcuffs. I took his wife home.

The original judge in the civil suit did find for my friend, and tried to have the trustee called to account, but the trustee had absconded to a Caribbean island, and the state declined to try to extradite.

 

[Joeinindy]

You brought this situation on yourself by trying to chisel every last nickel out of the dealers. Take the blame and pay up.

 

[OkeeDon]

I don't agree. All the dealer had to say was, "No." There is nothing wrong with trying to get the best deal. There is no reason to pay more than you have to. He didn't ask the dealer to cheat on the tax; he just asked the dealer to match a price he had gotten elsewhere. He would have preferred the dealer to lower the price and then pay the sales tax on the lowered amount; it was the dealer who tried to both eat his cake and keep it.

 

[shvl73]

I'll disagree, I think both the dealer & customer thought they could get away with it. Remember, he was looking to buy out of state to avoid the tax. I'm not sure of Virginia tax law, however I believe the customer would have the responsibility for paying the tax on out of state purchases, something he has led us to believe he was not going to do. The Virginia dealer thought, rather than lose a sale, he would assist in the deceit while the customer knowingly went along. I'm not so sure the Maryland dealer wasn't doing the same thing, again with customer knowledge & approval.