Ask The Taxgirl: Sales Tax On Cars

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Taxpayer asks:

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!

Before you go: be sure to read my disclaimer. Remember, I’m a lawyer and we love disclaimers.
If you have a question, here’s how to Ask The Taxgirl.

Kelly Phillips Erb

Kelly Phillips Erb is a tax attorney, tax writer, and podcaster.

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