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Frequent Contributor
ace9848
Posts: 285
Registered: ‎03-29-2008
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Is there any tax advantage to buying a car out of state from your residence?

Is there any tax advantage to buying a car out of state from your residence? Thanks!
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bogfrog
Posts: 70
Registered: ‎01-14-2009
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Re: Is there any tax advantage to buying a car out of state from your residence?

I don't know the legality issues involved, but on the face of it, I'd say definitely yes.  I am moving to Maryland and the sales tax is 6%.  Here in California it's 8.25%, so I'll save a good chunk of change by waiting until I move to Maryland to buy a car.

 

But like I said, I don't know if you're billing address determines the tax rate they give you.  It very well might.

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1111mel
Posts: 1,060
Registered: ‎02-13-2008
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Re: Is there any tax advantage to buying a car out of state from your residence?

[ Edited ]

The sales tax is calculated based on where you purchase it....however some states have "fees" they charge for you to register an out of state vehicle that they consider a re-capture on the lost sales tax (or possible lost tax) by you buying in another state.

 

In Texas it is a $90 one time fee.....

 

So..... as another poster mentioned by going from 8.25% to 6% that "fee" should be far less than the difference in sales tax.

 

When I lived in Vegas people would travel to Utah all the time into St. George to save on sales tax...no recapture fee, but they charged registration $$ based on the perceived value of the car in Vegas.

 

So check out your state's consumer laws on vehicles and you can get the right answers there.

Message Edited by 1111mel on 01-21-2009 10:57 PM
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Takunda1
Posts: 512
Registered: ‎06-08-2007
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Re: Is there any tax advantage to buying a car out of state from your residence?


ace9848 wrote:
Is there any tax advantage to buying a car out of state from your residence? Thanks!

As other mentioned, it also depends on how far from your state you are buying. For instance if you live in CA and buy in MD, although u may save 2.5% intaxes, the cost of transporting the vehicle to your state will offset any savings, also dont forget emissions tests required for your particular state. and possible title issues. I have worked in the titles department before and the issues, associated with transfer of a vehicle are many.

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usmc5855
Posts: 3
Registered: ‎01-23-2009
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Re: Is there any tax advantage to buying a car out of state from your residence?

It really depends on your state of residence laws and the laws of the state you are attempting to buy from.

 

Lets be honest AUTO SALES sales tax is a huge revenue center for a state/county. One dealership can pour millions of dollars a year into a state's coffers.


They do not like to lose this money that they feel they are entitled to.

 

The finance contract is written to the address you can prove residencey at. That is where you sales tax is calculated

 

In state your dealership charges you the sales tax rate of the location you have as an address. You can buy in one county but will be charged the rate of your residence county. 

 

If you are out of state your dealership may by law have to collect for your home state, Ohio has laws on the books where there is now a list of states they collect for.


If they do not collect then how your state handles the deal comes into play.


FOR EXAMPLE:


Sally lives in Ohio, buys a car in May in Ohio, gets her Ohio plates and in June moves to VA. When she registers her car there she has already paid sales tax and so is simply registering her car at the new address. No real issue.

 

Jim lives in MICHIGAN, with a MI address and buys a car in Ohio. His paid no sales TAX on the purchase. He was given a temp tag for his car and goes to his MI BMV to get his car registered/plates issued.


MI wants his sales tax of 6% on the $36,000 purchase and wants the $2160 before they will issue the License plate. Instead of being able to roll that 2200 into the auto loan, JIM now has to cough the money up in lump sum to keep his car on the road.

And this is all assuming everything goes OK for a dealership.


Do not forget you get a 30 day tag as that gives the dealership 30 days to finish the deal. The dealership will not release the title to you, which you may need in your new state for 15-21 days from date of purchase, leaving you scrambling trying to keep your new car on the road.

Established Contributor
203bravo
Posts: 736
Registered: ‎08-25-2008
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Re: Is there any tax advantage to buying a car out of state from your residence?

USMC is correct and you need to study the tax laws in your state of residence.  Most states have adopted a code that would charge you any differences in the tax rates.  If you buy somewhere that charges a 3% and your home state tax would be 5% you must pay the 2% difference in order to register your car.

 

Tricky topic.

Senior Contributor
MattH
Posts: 3,240
Registered: ‎04-03-2008

Re: Is there any tax advantage to buying a car out of state from your residence?


203bravo wrote:

USMC is correct and you need to study the tax laws in your state of residence.  Most states have adopted a code that would charge you any differences in the tax rates.  If you buy somewhere that charges a 3% and your home state tax would be 5% you must pay the 2% difference in order to register your car.

 

Tricky topic.


 

A number of years ago, shortly after buying a car my employers transferred me to a State with a higher sales tax than the State where I bought the car, so I ended up having to pay the difference between what I paid where I bought the car and what I would have paid to buy it in the second State.  This State at least made no distinction between a bona-fide resident of another State moving as I did versus somebody trying to avoid their tax.

 

Strictly speaking in most States one is required to pay "use tax" on the difference in sales tax on everything bought from out-of-State sellers including mail order catalogs and Internet merchants, but enforcement for stuff like books and clothing purchased online would hardly be practical.  Cars they can go after when one attempts to register them.  My wife and I actually do pay use tax to our State, but we do so based on a good-faith guess at how much we bought since it would be an incredible pain in the rear end for us to keep track of every purchase we make.

 

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