Random Thought of the Day - Car Taxation

[ASAP]

I always think about this and it makes me wonder a bit...

When a car is sold in the USA as new, the new owner pays a sales tax on it. When the car is resold, the new owner pays tax on it again... and it keeps going and going every time the car is sold. The reason for this is because we pay car sales tax based on each transactional sale and not on the "car itself" nor its usage.

This only applies to cars more than anything else because the car itself has to be registered and registered at which point the new owner has to pay taxes on it.

Here is a couple of hypothetical situations-

I buy a new car and sell it one month later... is it fair for me to pay full taxes on that vehicle even though the product has been consumed for such a short time?

Should there be a useful depreciatable value with regards to taxes on car?

Should taxes instead be paid annually on the usage of a car... i.e. like real estate taxes?

Something about the way cars are taxed just doesn't make sense to me... you should be paying taxes on the usage of the car like a lease or something to the like so that roads can be upkept etc etc. Thoughts?

[dreamingat30fps]

You already pay a usage fee in the form of your registration which in some states I hear can be quite a lot.

As far as making sense... it makes perfect sense if you're on the receiving end of the taxation.

[Alfisti]

Drives me absolutely fucking insane that private car purchases still need to include GST, are you fucking kidding me? In Australia GST only applies to businesses, if i buy a car from you i rightly don't pay GST because you are not a business.

It's an absolutely crazy cash grab, hate it.

[ASAP]

Originally Posted by dreamingat30fps

You already pay a usage fee in the form of your registration which in some states I hear can be quite a lot.

As far as making sense... it makes perfect sense if you're on the receiving end of the taxation.

Yea but thats the thing... it would make more sense if our current car sales tax as it is currently setup went back into the infrastructure used by the cars... i.e. roads, bridges and the like... what does it go to now? god damn social programs and other nonsense our govt spends money on...

it would be more fair to reuse that money in the form of an annual registration tax or some sort of usage tax that goes back directly to the infrastructure.

[MKSixer]

Originally Posted by ASAP

I always think about this and it makes me wonder a bit...

When a car is sold in the USA as new, the new owner pays a sales tax on it. When the car is resold, the new owner pays tax on it again... and it keeps going and going every time the car is sold. The reason for this is because we pay car sales tax based on each transactional sale and not on the "car itself" nor its usage.

This only applies to cars more than anything else because the car itself has to be registered and registered at which point the new owner has to pay taxes on it.

Here is a couple of hypothetical situations-

I buy a new car and sell it one month later... is it fair for me to pay full taxes on that vehicle even though the product has been consumed for such a short time?

Should there be a useful depreciatable value with regards to taxes on car?

Should taxes instead be paid annually on the usage of a car... i.e. like real estate taxes?

Something about the way cars are taxed just doesn't make sense to me... you should be paying taxes on the usage of the car like a lease or something to the like so that roads can be upkept etc etc. Thoughts?

Tax law is made to benefit those who understand the law and can apply it's esoterica to their advantage.

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

-Judge Learned Hand

[lemetier]

Originally Posted by ASAP

I always think about this and it makes me wonder a bit...

When a car is sold in the USA as new, the new owner pays a sales tax on it. When the car is resold, the new owner pays tax on it again... and it keeps going and going every time the car is sold. The reason for this is because we pay car sales tax based on each transactional sale and not on the "car itself" nor its usage.

This only applies to cars more than anything else because the car itself has to be registered and registered at which point the new owner has to pay taxes on it.

Here is a couple of hypothetical situations-

I buy a new car and sell it one month later... is it fair for me to pay full taxes on that vehicle even though the product has been consumed for such a short time?

Should there be a useful depreciatable value with regards to taxes on car?

Should taxes instead be paid annually on the usage of a car... i.e. like real estate taxes?

Something about the way cars are taxed just doesn't make sense to me... you should be paying taxes on the usage of the car like a lease or something to the like so that roads can be upkept etc etc. Thoughts?

It varies by state and isn't as cut and dry as you present it.

[rcracin]

Connecticut taxes car value yearly so that sort of makes sense with what you’re suggesting.

NY taxes the transaction so they’re not necessarily taxing the car, but rather the sale transaction.

I fucking hate it either way. My biggest peeve is that dealers are able to provide you with a tax credit on trade in but if you sell privately, you don’t get any tax benefit applied to your next purchase.

[ASAP]

Originally Posted by lemetier

It varies by state and isn't as cut and dry as you present it.

I would say its very cut and dry, the way we do it just isnt entirely explained well for some shady reasons. Why would car sales tax % even be different amongst states? It clearly has nothing to do w the infrastructure those cars use.

It gets even shadier in the north and mid atlantic states where some also have an "annual usage tax" like VA, where the owner then gets double double taxed lol.

[ASAP]

Originally Posted by rcracin

Connecticut taxes car value yearly so that sort of makes sense with what you're suggesting.

NY taxes the transaction so they're not necessarily taxing the car, but rather the sale transaction.

I fucking hate it either way. My biggest peeve is that dealers are able to provide you with a tax credit on trade in but if you sell privately, you don't get any tax benefit applied to your next purchase.

So in Ct, at time of purchase do you not pay a car sales tax at a given % ? If so that makes sense, if not... then you're being double played.

[fiveohwblow]

Originally Posted by Alfisti

Drives me absolutely fucking insane that private car purchases still need to include GST, are you fucking kidding me? In Australia GST only applies to businesses, if i buy a car from you i rightly don't pay GST because you are not a business.

It's an absolutely crazy cash grab, hate it.

That’s why I PARTIALLY appreciate AZ. Don’t pay sales taxes for private party sales. Now if we could just get this duplication taxation for dealer sale on used auto eliminated…

Edit: to clarify, even if used and purchasing from a dealer you’ll pay taxes in AZ.

[rcracin]

There’s a whole business dedicated to registering cars in Montana for ppl in other states due to lack of sales tax. Can’t count how many super cars i’ve seen with Montana plates.

Same with expensive ass RV’s.

[Joekerr]

Originally Posted by lemetier

It varies by state and isn't as cut and dry as you present it.

ITT we learn that Lemmie works for the gubbermint.

Up here it is reasonably straightforward, and at the same time, disgusting how many times a single item can be taxed and taxed again.

[lemetier]

Originally Posted by ASAP

I would say its very cut and dry, the way we do it just isnt entirely explained well for some shady reasons. Why would car sales tax % even be different amongst states? It clearly has nothing to do w the infrastructure those cars use.

It gets even shadier in the north and mid atlantic states where some also have an "annual usage tax" like VA, where the owner then gets double double taxed lol.

Then how do you explain Alaska, Delaware, Montana, New Hampshire, and Oregon where there is no sales tax?

If you want to get even murkier, the tax rate (and method) on vehicle sales can vary beyond each state. Within those, it can vary between each individual taxing district.

[lemetier]

Originally Posted by Joekerr

ITT we learn that Lemmie is occasionally contracted by the gubbermint.

FTFY

[MKSixer]

Originally Posted by rcracin

There’s a whole business dedicated to registering cars in Montana for ppl in other states due to lack of sales tax. Can’t count how many super cars i’ve seen with Montana plates.

Same with expensive ass RV’s.

This.

Most of my friends with high-value cars have Montana registration.

[3.0L]

I generally keep my cars 10 years, so the one-time-per purchase sales tax doesn't get me wrapped around the axle too much.

As a contrast, I own a small 4-place Piper airplane and I pay property tax on it once a year. The airplane is 69 years old and it's been in our family for 57 years. That's a lot of property tax, folks.

Oh, and to add insult to injury, if I add any value to the airplane such as a new engine, upgraded avionics, etc., my annual property tax increases.

[ASAP]

Originally Posted by lemetier

Then how do you explain Alaska, Delaware, Montana, New Hampshire, and Oregon where there is no sales tax?

If you want to get even murkier, the tax rate (and method) on vehicle sales can vary beyond each state. Within those, it can vary between each individual taxing district.

I sure as heck can't explain this... can you? Can anyone? The only thing that's cut and dry is someone getting screwed.

Originally Posted by MKSixer

This.

Most of my friends with high-value cars have Montana registration.

Yeah, my comments are more about the law itself and how a fairer reform would benefit everyone... Montana (while legal) is more of a skirting of the law which shouldn't be necessary in the first place... but again, we could talk about tax laws in the USA for days which are nonsensical from the get go.

[Humdizzle]

i think montana plates make you look cheap. but its smart. i just wouldn't want to be hassled by a cop about it. having out of state plates i feel makes you stand out more to them.

anyway laws vary state to state on taxation. In my state i can sell private and use the tax credit within 180 days. So i'm only taxed on the difference between the old and new cars value. i sold my 458 to a guy in LA and bought a used gt3 from NV... and was only taxed 4% on the 20k difference. I still have to pay property tax every year though.

there are some states like illinois with no personal property tax on cars. but you gotta pay the full sales tax each time you buy a new car i think.

[zx10guy]

Originally Posted by lemetier

Then how do you explain Alaska, Delaware, Montana, New Hampshire, and Oregon where there is no sales tax?

If you want to get even murkier, the tax rate (and method) on vehicle sales can vary beyond each state. Within those, it can vary between each individual taxing district.

Actually, DE has a sales tax on motor vehicles. It's 4.5%. There is no sales tax for other items you would purchase from a store. For high dpllar items such as electronics, I have the online store ship it to my vacation home in DE if they charge sales tax if they ship it to my primary home address.

[dreamingat30fps]

Originally Posted by ASAP

Yea but thats the thing... it would make more sense if our current car sales tax as it is currently setup went back into the infrastructure used by the cars... i.e. roads, bridges and the like... what does it go to now? god damn social programs and other nonsense our govt spends money on...

it would be more fair to reuse that money in the form of an annual registration tax or some sort of usage tax that goes back directly to the infrastructure.

Yeah it would be great if the govt knew how to manage money and spend it wisely.

[dinonz]

Originally Posted by ASAP

I would say its very cut and dry, the way we do it just isnt entirely explained well for some shady reasons. Why would car sales tax % even be different amongst states? It clearly has nothing to do w the infrastructure those cars use.

It gets even shadier in the north and mid atlantic states where some also have an "annual usage tax" like VA, where the owner then gets double double taxed lol.

Wow - you really missed the point. You said:

"Why would car sales tax % even be different amongst states?"

Lets shorten that slightly:

"Why would sales tax % even be different amongst states?"

Why? Because states control their own sales tax that's why! Some don't have sales tax at all (Montana - research titling an RV or Supercar in Montana) and have income tax instead. Sorry but that question REALLY highlights your lack of understanding here.

Something else with registering vehicles in Montana - it circumvents exactly the problem you described. Instead of selling the car, you sell the LLC that owns the car. No sales tax on selling a company, and the new owner doesn't even have to re-title the car - the company still owns it.

Despite it potentially saving me tens of thousands in sales tax, I didn't go down the Montana route. Didn't need any reason for extra attention when driving my cars in Texas on Montana plates.

[dinonz]

Originally Posted by MKSixer

This.

Most of my friends with high-value cars have Montana registration.

I nearly did this, but shied away because I knew I wanted the cars in Texas, and I didn't want the police pulling me over asking why I had Montana plated cars pretty much permanently in Texas (my 2 Lamborghinis are HIGHLY distinctive and cops will recognize them) and then also I didn't want any insurance hassles either with cars insured in Montana and based in Texas etc.

However, I have just learned recently that this was almost a huge mistake - when I retire and return to NZ, I can only take in cars titled in my personal name - so anything owned by a Montana LLC would not be considered my car and I'd have to pay 20% duties and tax to take them home. Sadly, I learned this after I title the Ferrari (not such a big deal) but also after the Diablo - it's titled under my Texas LLC, so to take it to NZ with me I have to "sell" it back to myself now, and pay the sales tax again