Ask the taxgirl: Sales Tax on Cars

Taxpayer asks:

Hi Tax Girl!

Maybe you will find this interesting..

Just bought a car off of ebay motors. The car is in a different
state. The person I am purchasing the car from does not have a
physical presence in my state of any kind. And the entire transaction
has been completed over the internet. (i.e. the funds were transfer,
delivery options were iron out, etc.)

Why doesn’t a transaction like this fall under the interstate commerce
rules for sales tax exempt, just like my amazon.com purchases?

You Rock!

Taxgirl says:

The real reason is because you need a title…

You see, you would owe a use tax on this purchase whether or not you paid sales tax. While it is true that the seller may not be required to collect sales tax in every case, most states have a “make up” tax commonly called a “use tax” that requires you to pay the equivalent of unpaid sales tax.

The thing is, most people just skip this step.

However, in the case of a motor vehicle, the DMW will likely not issue you a legitimate registration/title without proof that sales tax (or use tax) has been paid. You usually have to submit a receipt or a certificate to show proof of payment.

So, no mystery, just another layer of government to deal with!

Like any good lawyer, I need to add a disclaimer: Unfortunately, it is impossible to give comprehensive tax advice over the internet, no matter how well researched or written. Before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl!

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