Vehicle Sales Tax Questions

jipster

I beleive the original poster had an understanding with the dealership that her OTD offer included sales tax and fees. That the dealership calculated the tax based on the wrong state/district does not supersede the fact that the customer and dealership came to an agreement on what the total price of the car would be. The dealership made an error in their calculations, they should eat the $450.

volvomax

You are assuming that it was done on purpose.
you are also assuming that I or anyone else would do it on purpose.

Obviously you hold dealers in little regard,so I have no more time for the likes of you.

A mistake was made,thats all.
It is no different than if your accountant made a mistake on your taxes.
you are responsible,not him.

volvomax

if the dealer charges more sales tax than needed (by mistake) they should be able to keep it since it is part of the OTD price. it goes both ways- if they overcharge they should refund and if they undercharge than the customer should pay it.

Actually, you can't do this either.
Where taxes and license fees are concerned,the dealer acts as an agent for the state.
If the amount of tax is $X and the dealer collects $Y,the dealer MUST refund that money.
OTD price means absolutely nothing.
I really don't know why all of you seem to think it does.
If you discovered that you paid too much in tax or license fees,and went to the state about it,the state would make the dealer refund that money EVEN IF you agreed to an OTD price w/ the dealer.

jipster

You are assuming that it was done on purpose.

You are assuming it wasn't.

Being in the biz you seem all to quick to forgive these "mistakes". As someone who reads about these "mistakes" quite frequently on Edmunds, I'm sure you can see why I'm a bit skeptical. I rarely read of "mistakes" which put money in the consumers pocket.

Whether it was done on purpose or not, an agreement on price was made. If the dealership was legit they would do the respectful thing and honor that agreement.

nj2pa2nc

I agree with you volvomax. when I was getting prices for my acura I got prices from dealers near me in NC. I ask for prices before tax and license fees and used those prices to get prices from Pa dealers. I also told the Pa exactly what options were included in the price. Pa won

jipster

Well, when you are comparing prices from dealerships in different states you have to ask for pre-tax and license fees prices... as each states tax rate may be different.

Not sure why so many of you are having problems with the OTD pricing concept... heat stroke perhaps? :shades:

epsorenson

i'm not sure if this has already been discussed but can someone please help me. curious if sales tax has to be paid in the event of vehicle trade in CA (i.e. i trade my vehicle for vehicle of equal value--no money exchanged). i was always of the understanding that tax was not paid in that scenario although someone told me recently that it has to be paid.

can anyone clarify>

rroyce10

You have to remember, the dealer is only an "agent" for tax collection ... there is no profit, they don't get a free trip to Disney World, no free sleeve's of Titleist golf balls, not even free coupons to Denny's on senior day --- it's a courtesy.

If the tax rate in DC is more, then the customer pays it ...

This reminds me of the buyers that come to Florida (a reciprocating state) from NY and "New Jawsee" and they want the dealer to show a Florida address with a New York license and residence to save 1 or 2% on the sales tax (usually after the deal is done) ... taxes are based on residence, not vacation time.



Terry :shades:

british_rover

I sell so many cars to people with New York, Conn. or Mass. Licenses but second homes in Florida it is not even funny.

All to get out of the property taxes in CT and MA and the high sales tax in most of New York.

volvomax

You are assuming it wasn't.

dude, can not comprehend?
The dealer cannot profit from sales tax. Sheesh

Being in the biz you seem all to quick to forgive these "mistakes". As someone who reads about these "mistakes" quite frequently on Edmunds, I'm sure you can see why I'm a bit skeptical. I rarely read of "mistakes" which put money in the consumers pocket.

Given how many purchase transactions occur every day,not to mention the 17 MILLION cars that are sold annually, I'm astonished that you can think that a few posts on Edmunds constitute a trend.
Plus,people post ALL THER TIME about how they got a better than believed car deal. That usually only happens when a dealer screws up,puts too much in the trade,uses the wrong incentive. It happens. Grow up.

Whether it was done on purpose or not, an agreement on price was made. If the dealership was legit they would do the respectful thing and honor that agreement.

As I told you,the "agreement" says otherwise.

joel0622

The quickest way in the world to have Mr Revenuer come and Katy bar the doors is to mess with Sales Tax.

Jipster, you never here the stories about people getting money back or refunded because those are not fun, cool, stories to tell here. Only when a consumer feels like they got screwed will they tell there tale from the highest roof top.

Holds true here and in real life. Experiment some time. Ask the next 10 people you see with a drive out tag or with what looks to be a new car how they like it, then ask how the experience was. Those who had no problems will tell you "Oh it was fine" occasionally you might get a "It was great", but find some one who had a bad experience and see if they don't bend your ear for ten minutes.

We saved 7 people $750 today by dating there contracts tomorrow. Why, because we know Ford is starting a $750 owner loyalty program in the morning and we did not think it was right to not give it to folks today. I would bet $100 that out of those 7 people one might mention that to someone, the fact we gave them a rebate they did not qualify for.

But you know what, when the commercials hit the TV tomorrow I will take 20 phone calls from people who have bought in the last 30 days telling me we screwed them out of the $750. Then they will proceed to tell any one who will listen how they got cheated.

jipster

The other guy seems to be having some anger management issues, so I'll try to explain this to you joel. You're generally level headed and fair. I have no problem whatsoever with a buyer paying the appropriate amount of tax that is due. No where have I posted a dealer can profit from taxes or that someone should not be paying taxes on a vehicular purchase. And I really don't understand where or why you guys are getting this impression.

The widely accepted definition of an Out the Door price is a price that includes everything (price of car, taxes, fees, etc.). The amount it cost you to drive the car off the lot, the number you write on the check if paying cash. Look at the OTD discussion and you will see this written a thousand times by salesmen and non sales people alike.

So, if someone makes you a $20,000 out the door offer, and you accept, how do you write it up? Do you write it up and say, "That's $20,000 OTD and $1,200 in taxes... so Mr. Volvomax you owe Mega Ford's $21,200." I don't think this method would win you many repeat customers.

No. What you do is take the $20,000, figure out how much you need to put in the price of the car column, then how much should go in for taxes, and whatever is left for dealer fees.

So, in the case of our original poster, she made an OTD offer that was accepted by the dealership... say $20,000 for O.J's Ford Bronco. Our poster made it quite clear several times over, with the information she provided, that she was a D.C resident, and the taxes should be calculated on this... not VA. tax. Now, instead of the dealership putting $18,500 for the price of the Bronco and $1,500 for DC's tax rate... they put $19,000 for the price of the Bronco and $1,000 for taxes based on Va's tax rate. Can you see the problem with that? Can you see how easy it would be for a unethical dealership to take advantage under circumstances like this?

The dealership can raise the price of the car, intentionally short change themselves on the tax due, then come back to the customer, say they calculated the tax wrong and are owed $500. The paperwork indicates they are correct, but their intent could be indicative of a scam.

Now again, I am not saying this dealership intentionally tried to swindle our original poster. But, the industry doesn't have the black eye it has for nothing. And that as a gesture of goodwill, the dealership should eat the $500.

joel0622

Gotcha, that makes sense. Thats what happens when I skim through post and not read them

joel0622

BTW, here is how I avoid this very same circumstance from happening to me.

After being the nice guy and paying the difference in Tax that we are not obligated to on several out of state deals I came up with this form. It drills the fact home to customers that the taxes are in fact there responsibilities and that we are not 100% educated on the tax laws of every state.

The vehicle you are purchasing is being registered outside the state of Tennessee. Tax and Licensing fees will be paid to the state of________________. Though we make every effort to ensure our calculations are correct there are instances when the wrong amount is charged.

In the event that was to happen your signature on this document ensures that in the event of an under payment you understand you are responsible for paying the balance. The dealer will not pay the difference. In the event of an over payment the dealer will gladly refund you the difference once your state has completed the tag and title work.

Buyer__________________________

Co-Buyer_______________________

Dealer _________________________

jipster

Gotcha, that makes sense.

Thank you sir. Now that I feel I am no longer losing my mind, I can cancel my appointment for a psychiatric evaluation. Any of you other guys feel free to take the open slot.

jipster

Good idea. I didn't realize it happened so often. Better to focus on price instead of OTD when buying out of state.

qbrozen

Like I said, as long as you are willing to let it work both ways, fine by me.

Personally, I read my contracts, so this never would have escaped me and the argument would have taken place in the F&I office. I think it is an honest mistake. In fact, I think mistakes should be expected. I mean, they do dozens of these a day. The buyer only has to read 1.

jwm40517

Terry, glad to see you posting again. Always enjoyed your wit and common sense. I hope your absence was voluntary and not serious illness or jail.

joel0622

A dealers Geographical location has allot to do with it. We are in a convenient location for several states so we do a good bit of out of state biz. If you are for example in the middle of TX you probably don't get as much.

rroyce10

**.. I didn't realize it happened so often ..**

Not only are we talking about a state tax difference .. but a possible county tax difference in that state ..

... one county in a different state (or even the same state) can be 7% and the county 1.5 miles away can be 8.5% ... we've had customers tell us one address, then 2 days later they want to use their business address because they "just remembered" they can save 1%, but it's not their residence ... this stuff goes on all the time, the form shown is a basic form used by dealers from Manhattan to Malibu --- and even then, customers will still argue the issue.

And speaking of the word "difference" ... "the only difference that makes a difference -IS- the difference" ...

If a "smart shopper" has done his homework, studied the market and knows what's going on, then the only thing he/she needs to add is the proper sale tax (and any payoffs) and a fair tag fee - period.



Terry :surprise:

jipster

... or jail.

LOL. I didn't read anything in his bio indicating he had served time in the big house.

Everyone keeps fishing for where Terry has been, understandable... but I think he wants to keep it private.

edited: Terry, e-mail me and tell me where you've been. It'll be our little secret.

qbrozen

i believe he indicated he got lost on the 9th hole sandtrap. almost died out there. an arabian finally rode by on his stallion and helped the guy out.

rroyce10

**.. i believe he indicated he got lost on the 9th hole sandtrap. almost died out there. an arabian finally rode by on his stallion *(camel)* and helped the guy out ..**

cjeric

I recently moved from Ohio where you pay the sales tax upfront for a leased vehicle to Massachusetts where you pay it on a monthly basis. Since the sales tax is simply added to the payment in MA, in effect I'm paying taxes on top taxes, i.e. double-taxation.

Do I have any recourse to avoid this double-taxation? Is is possible to have the unused portion refunded from Ohio (sounds very unlikely) or not be required to pay sales tax to MA since I've already paid it to Ohio? Thanks!

kyfdx

Living in a state that taxes the payment (like MA), I think your better chance is to get a refund from Ohio on the unused portion of the lease.

No idea if you can, but that is how I would approach it, first.

Good luck,
kyfdx

newdeleasee

I am looking to lease a new BMW 5-series and I was putting the numbers together to come up with a down payment. But I ran into a few issues and wanted your opinion.

First, the dealership told me that if I put money down on the car as a cap reduction I would still have to pay delware use tax on that amount since it is considered "an upfront lease payment." I am purchasing from an out of state dealer and am wondering if that is true?

Second, they informed me that whatever I put down is at risk if I were to have a total loss collision since the gap insurance would not reimburse me the down payment, this seems ironic if in one situation the cap cost reduction is called "upfront lease payment" and in another scenario is at risk?

If these are both true, I am better off putting no cap cost reduction with my money factor of 0.00181

Thanks

volvomax

Your dealer is correct in both cases.
Any upfront money you put down is taxable.
Also, Gap insurance just pays the difference between the payoff amount and the amount your Ins co is willing to pay.
Your downpayment would have the effect of lowering the payoff.
Cap cost reductions are generally not a good idea.

delta737h

cjeric,

There is no provision in the Ohio Revised Code for a refund of the tax. See Q9 on page 5 in the following document...


http://tax.ohio.gov/divisions/sales_and_use/documents/LeaseComboRev0306_002.pdf

John
Medina, Ohio

joel0622

By putting money down all you are doing is buying a payment. Either way when it is all said and done it will still be money out of pocket.

bus7

In PA,I live in westmoreland county,but my zip code is Allegeny county.What sales tax do I pay on new car?

jmonroe

In PA,I live in westmoreland county,but my zip code is Allegeny county.What sales tax do I pay on new car?

I just fell onto this board, and since I live in Allegheny County (7% tax county) and you live in Westmoreland County (smart man, 6% tax county) I know why you are asking this question.

I don’t know the answer to your question but I’ve always heard that when car dealers collect tax they look at the Zip Code for justification as to what tax rate is to be charged. I’ve never heard of your predicament and I think you’ll have a tough time proving you live in Westmoreland County.

To get the correct answer on this I’d go to your municipality office. I wouldn’t be asking that question here. You see, I know some of the guys that are posting here since we post on other Edmunds boards and I know they ain’t too bright. If you listen to them you’ll be posting from West Penn (for those not familiar with the area this is the local Big House).

jmonroe

bus7

Thanks for your reply . Lucky I don't need a car for awhile. I don't see how they can force u to pay sales tax to another county because of the zip code .But government usally dose what it wants.
bus7

dtownfb

Normally you pay tax based on where you live i.e. where the car will be registered.

jmonroe

But government usually dose what it wants.

I agree but they have to stay within the laws they write and like 'dtownfb' said in post 702 you usually pay tax (cars in this case) based on where you live.

Like I said in my previous post, your municipality should have the answer to this since you can't be the only one affected. You could also ask a neighbor but if they didn't know the true facts they could have paid the higher tax rate.

Why even think about this, go to an official source.

jmonroe

volvomax

In most states, you pay the tax of the municipality where the transaction was done.
In other words, the tax where the dealer is.

As an example, if you live in Phoenix(8.1% tax) but you buy a car in Scottsdale(7.95% tax) you pay the tax in Scottsdale, and vice versa.

bus7

I wish that was the case here in Pa, but it goes by county u live in, or zip code.In my case I live in one county with a different zip.

cccompson

And if I, as an Ohio resident, buy a car in Scottsdale what, if any, tax will AZ try to collect from me?

joel0622

None, unless you were titleing the car to the address at your second home in AZ.

I have never worked a deal where taxes were not based off of the address where you are titleing the car. What ever the address on the title reads is where taxes will be paid to

kyfdx

If you take delivery of a car in California, you'll pay California sales tax... No matter where you live..

Just one example.

The address thing works well within the state where you reside, but out-of-state sales tax rules vary widely by state. Most states will let you out tax-free, if you live in another state... But, not all of them.

regards,
kyfdx
visiting host

cccompson

The good news is that your home state will give you credit where tax was paid at point of sale.

nj2pa2nc

i live in north carolina and bought my acura in pa. I did not pay any tax when i bought the car. I paid NC tax when i registered it there.

cjeric

Thank you for the response and link John. It seems that is for terminated leases though, but like you said, there doesn't seem to be a provision for a refund. It's odd that they don't have this as a question though since it must be pretty common to move from a upfront tax state to a payment state. It's not fun to pay taxes on top of taxes :-)

Maybe MA would exempt the tax? I'll have to do some more research.

kyfdx

I think that depends on the state, as well..

My state won't give you credit for paying tax out-of-state.. Cars registered here, have to have tax paid here.

joel0622

Yes that is true, we send KY taxes to KY all the time, but you don't get double dipped, i.e we don't charge you TN taxes and KY taxes its one or the other. I do about 20 KY deals a month. Oh BTW your state is a PITA, taxes change county to county, some you pay on difference, some you pay on MSRP, and that $5 Sheriffs Safety inspection on a brand new car still amazes me

kyfdx

The only time you pay on the difference in KY, is if you trade in one used car for another used car at a dealer..

Any time you get a new car, there is no credit for trade-in. In most counties, you pay 6% (state rate) on 90% of MSRP.

And the sheriff? Someone from the sheriff's office actually looks at the VIN tag of each car, to make sure it matches the paperwork. Nothing to do with safety. Only fraud prevention.

Leases: $20 U-Drive-It permit to the state, so that you only have to pay tax on the payment, rather than on the whole car.

At least that's all I can remember...

joel0622

Any time you get a new car, there is no credit for trade-in. In most counties, you pay 6% (state rate) on 90% of MSRP.


That has changed depending on the county you live in now. Some will let you pay on the diff and others still use MSRP regardless what you pay for the car.

cccompson

You might want to double-check on that. A quick 5 minute check of the KY state website suggests otherwise. Perhaps there was some recent statutory revisions - see County Clerks: FAQ on Sales and Use Tax and MVU Tax on the Sales and Use Tax page. Although that document does not explicitly address the point, similar situations (moving into the state and buying boats, etc., outside the state and bringing them in) allow for a credit.

volvomax

You would pay the AZ sales tax.

volvomax

None, unless you were titleing the car to the address at your second home in AZ.

Not true actually.
Since Ohio's state tax rate is higher than AZ's, you would pay AZ tax if you took delivery in AZ.
Plus, you would pay city and county tax as well.

joel0622

Why don't ya'all use Out Of State Tax Affidavits?