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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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I live in Arizona and am planning to purchase a used

Resolved Question:

I live in Arizona and am planning to purchase a used car from a family member in another state. Do I have to pay sales tax on that purchase?

todd
Submitted: 8 years ago.
Category: Tax
Expert:  Ed Johnson replied 8 years ago.

DearCustomer


Thank you for the opportunity to respond to your question.


Vehicle Sales between individuals are not subject to sales and use tax in AZ. However, AZ is interested to know the sales tax was paid on the vehicle in the state where it was orginally purchased.


The state of AZ will want to see proof that the tax in the other state was paid, at time of it originigal registration. If AZ taxes at a higher rate, then AZ will collect the difference. If the other state taxed the vehicle at a rate higher than AZ, then no additional sales tax will be due.



YOu can read more about he AZ sales tax law with this publication:


http://www.revenue.state.az.us/brochure/610.pdf

Customer: replied 8 years ago.
Reply to Ed Johnson's Post: the state I am buying it from a private party does not have sales tax. So based on your answer, I would have to pay the 8% sales tax in Arizona when I register it?
Expert:  Ed Johnson replied 8 years ago.
Customer

Thanks for the additional information.


According to the law, you would have to pay the 8% tax, as if the vehicle had never been taxed.


The law however gives you an out. If you were a non-resident of AZ, and you purchase this vehicle from that second party, and register and use it for the first time in the other state, then you may avoid the sales tax.


Many states have the same type of laws for the purchase of vehicles. The laws were made to prevent residents from purchasing vehicles form neighboring or tax favored states in order to avoid sales tax in the home state.


If when you register the vehicle, they charge you the sales tax, and you do not think it is fair. You may requerst a hearing from the tax assessor for relief.


Best Regards


Ed

Customer: replied 8 years ago.
Reply to Ed Johnson's Post: If I buy the car used, how do I know if they paid tax? That typically isn't part of the negotiation (now in Oregon, I know they didn't pay tax, because the state doesn't have it). It doesn't make sense that if I buy from a person vs. retailer that I would have to pay tax on that vehicle. if the car is 2 years old, how do they charge you (based on the purchase price or original price)? Is the rate 8%? How come I don't pay sales tax when I buy $2000 bed from someone at a garage sale?
Expert:  Ed Johnson replied 8 years ago.

DearCustomer


The sales and use tax for tangible items is treated differently depending on what class of items are purchased. The tax you would be paying on the auto, according to AZ is actually a use tax. The tax on a bed is a sales tax. In fact, in some states, such as NJ, sales tax is required to be collected and paid for items purchased at flea markets, garage sales, and flea markets. Though it is required, most states do not have the means for enforcement for garage and lawn sales. However, in NJ, PA, and other states, the sales tax representative is surveying the flea markets for compliance.


I called the AZ assessor's office and DMV today to verify the information. The response from both was that the tax, if any would be determined at registration.


How would they know? They would know because when you register the vehicle, they run the VIN numbers. When you title it, they will see which state it came from, and they will know if it is a state that taxes car sales or not. They would tax you on your purchase price.


One of our clients in NY had a boat that the state of NY came for the sales tax. The boat was purchased 10 years ago in Connecticut, second hand. He took the boat to Florida where he registered it. Then he brought it to NY where he docked the boat. 10 years after registering it, NY came for the sales tax.


It is the same kind of thing for you, with your car registration. If they do not charge the sales tax at time of registration, and years later on an audit, they discovered sales tax was not paid on the vehicle, then they will come for it, even if it was bought used.


States are really going wild on the sales tax issue since a test of auditing and the law in 2003 of the ability to collect these kinds of sales tax.


The laws on automobiles and sales and use tax has been common since the 70's.


Best Regards


Ed


Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
Ed Johnson and 6 other Tax Specialists are ready to help you

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